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Realistbear

Higher I R Are Now Virtually Guaranteed

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http://business.timesonline.co.uk/article/...2083861,00.html

Factory price rise reignites inflation fears

By Andrew Ellson

A second successive month of rising factory gate prices has heightened the threat of consumer price inflation,
all but eliminating the prospect of lower interest rates in the coming months
.
The Office for National Statistics reported that manufactures input prices were unchanged in February but output prices increased by 0.3 per cent with factories trying to pass on some of their recent cost increases.
It was the second month running that output prices have crept higher, renewing fears that a year of spiralling energy and raw material costs will begin to feed through to higher prices in the shops.

With the world moving up up and away it never seemed likely that the B o E could swim against the tide.

:)

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... and the BBC say...

****

Inflation steady at factory gate

UK factory gate inflation held steady last month, despite manufacturers facing lower than expected costs as oil and gas prices fell slightly.

The Office for National Statistics (ONS) said output prices rose 0.3% last month, keeping the annual rate at 2.9%. Analysts had expected the Producer Prices Index figure to dip to 2.8%.

Meanwhile, core output prices - which exclude food, drink, tobacco and fuel products - rose 0.2% as expected, taking the annual rate up to 1.8%.

Input prices were unchanged at 15% in February, as energy prices slipped slightly.

It marked the first occasion in almost six months that manufacturer costs had failed to rise.

*****

Who's telling the truth?

Edited by WooHoo

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YOY fig is 15%.

http://www.gnn.gov.uk/Content/Detail.asp?R...55&NewsAreaID=2

Input prices: summary

The input price index for materials and fuels purchased by manufacturing industry rose 15.0 per cent in the year to February and fell 0.2 per cent between January and February. The fall in the input index between January and February mainly reflected a price fall in crude oil. Prices of imported materials as a whole (including imported crude oil) rose 0.2 per cent between January and February.

Seasonally adjusted, the input price index remained unchanged between January and February.

The input price index for manufacturing industry excluding the food, beverages, tobacco and petroleum industries rose 10.7 per cent in the year to February. Seasonally adjusted, the index rose 0.5 per cent between January and February.

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More fuel to the higher IR fire this morning:

http://freeserve.advfn.com/news_G10-s-Tric...h_14571192.html

BASEL (AFX) - G10 central bankers do not expect rising interest rates to
pose any threat to the global growth outlook, G10 chairman Jean-Claude Trichet
said following a meeting of the central bankers' group.
Asked if moves to tighter monetary policy in the world's three largest
economies might endanger economic growth, Trichet told a news conference:
"Certainly not.
All of these central banks are doing what they do in order to
provide price stability
.
At its January meeting, the G10 said global growth was continuing at a
"dynamic" pace
, with a possibility that growth could be slightly higher in 2006
than it was last year.

If Gordon wants stability he will need to step inline with the rest of the world and rachet up the rates (even if the pips squeak).

Smart money might be drifting into equities? BTL looks decidedly poor with low yields, more regulation, higher IR and a flat market.

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Smart money might be drifting into equities? BTL looks decidedly poor with low yields, more regulation, higher IR and a flat market.

When the FTSE-100 breaks through the magic 6,000, the media will jump on the bandwagon and trumpet the stock market as a good investment once more. Then private punters will pile in. The professionals, who have made a fortune over the last two to three years, will only be too happy to sell to them. That's just the way it goes.

Still, it will be another nail in the coffin for BTL.

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http://business.timesonline.co.uk/article/...2083861,00.html

Factory price rise reignites inflation fears

By Andrew Ellson

A second successive month of rising factory gate prices has heightened the threat of consumer price inflation,
all but eliminating the prospect of lower interest rates in the coming months
.
The Office for National Statistics reported that manufactures input prices were unchanged in February but output prices increased by 0.3 per cent with factories trying to pass on some of their recent cost increases.
It was the second month running that output prices have crept higher, renewing fears that a year of spiralling energy and raw material costs will begin to feed through to higher prices in the shops.

With the world moving up up and away it never seemed likely that the B o E could swim against the tide.

:)

Sorry, but the quote says "eliminating the propects of lower rates in the coming months". Which could mean that rates are flat and then fall, or rates stay flat. Nowhere does it say that IR are now virtually guranteed.

You have more spin than dervishes ;)

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Sorry, but the quote says "eliminating the propects of lower rates in the coming months". Which could mean that rates are flat and then fall, or rates stay flat. Nowhere does it say that IR are now virtually guranteed.

You have more spin than dervishes ;)

"all but eliminating the prospect of lower interest rates in the coming months"

Sorry, but you can't spin this to mean rates could fall. If lower rates have been eliminated the obvious conclusion is that they will have to rise given that the B o J, Fed and ECB are all moving to the up side.

The flood of IR news seems to have got the bears and trolls into a spin for sure! Panic even?

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"all but eliminating the prospect of lower interest rates in the coming months"

Sorry, but you can't spin this to mean rates could fall. If lower rates have been eliminated the obvious conclusion is that they will have to rise given that the B o J, Fed and ECB are all moving to the up side.

The flood of IR news seems to have got the bears and trolls into a spin for sure! Panic even?

I wasn't spining it for a fall, I was pointing out that your spin for a Guaranteed rise was twaddle

It says in the COMING MONTHS, not they have been eliminated for good, and certainly not that rates wont be held for the forseeable future. IR were predicted to fall in the coming months, now they are predicted to remain on hold.

It certainly doesn't say "Higher rates are now virtually guaranteed"

Read what you want, but it doesn't make it true

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I wasn't spining it for a fall, I was pointing out that your spin for a Guaranteed rise was twaddle

It says in the COMING MONTHS, not they have been eliminated for good, and certainly not that rates wont be held for the forseeable future. IR were predicted to fall in the coming months, now they are predicted to remain on hold.

It certainly doesn't say "Higher rates are now virtually guaranteed"

Read what you want, but it doesn't make it true

The flavour of the headline is captured in the word "all." What they are saying is that the chances of a fall in rates is now so far from likely that the only option is for rates to move in the other direction. If you remove the word "all" I can see your point.

How you interpret someone else's view often reflects on your own position. I see "all but eliminating..." as removing that positon as an option. Thus, rates will have to move to the upside (especially given the surrounding circumstances of the three major players all raising rates which eliminates just about every chance of a rate reduction and every chance of further increases).

IMHO, of course, :)

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Kingofnowhere is one of the biggest bulls on the motley fool board. After sitting on and producing housing market data that would make even the likes of John Wirigglesworth think he should get a life, he turned bull and bought a house. Ever since then he has been talking it up and will continue to do so all the way to the bottom of the market.

Some very unsuspecting people are going to get burnt very soon, and that's understandable. What is a joke though is how someone who produces so much data on the motley board mis reads the game.

Edited by delite1

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I don't mind hearing some opinion in the opposite direction, so keep it up RB. That's what I am here to read after all ... sounds like a pretty fair conclusion to me ... Christ, the truth really seems to hurt some people!

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Kingofnowhere is one of the biggest bulls on the motley fool board. After sitting on and producing housing market data that would make even the likes of John Wirigglesworth think he should get a life, he turned bull and bought a house. Ever since then he has been talking it up and will continue to do so all the way to the bottom of the market.

Some very unsuspecting people are going to get burnt very soon, and that's understandable. What is a joke though is how someone who produces so much data on the motley board mis reads the game.

Hi Delite

Yep, but I purchased BEFORE the recent HPI took off, and the market is running exactly the way I said it would. Do you want me to drag up my predicitions that HPI would hit 7%, ohh of course you do.

Both these written in Nov 2005 (I seem to be more accurate than the VI like Halifax and Nationwide)

http://boards.fool.co.uk/Message.asp?mid=9644785

"We then end up with an average expected HPI in April of 7%."

Now what is the Halifax (which those numbers were based on Showing, ahh 6.7% HPI. of course they use the three month rolling average at 5.5%, but I've still got two months more left , not bad for someone who is misreading the game.

And for regions

http://boards.fool.co.uk/Message.asp?mid=9673419

"House prices- to rise at about the level of wages this year, with London (up to 10% HPI), and the SE up to about 7.5%. Scotland will also rise above normal, and NI I have no idea. Midlands will probably do the worst."

Blimey London and the SE doing best, perhaps I had a time machine and saw the FT numbers (London 5.7%), or the ODPM London and the SE rising about over 2% in Jan.

Want any more predictions?

1) There is no crash coming, debt servicing costs are in line with historical norms, and so is the average house price in line on a repayment with the average salary. Interest rates would need to be 9.5% or the average house would need to be 40% higher than it is now, to put us in the same size "bubble", as at the higt of the 90's

2) the Economy will pick up this year

3) I wont win the lottery

4) This board will be writing about "the crash" around the corner coming next year as well

I think I'm reading the game blimin well ;) , But then I would say that I'm biased for my own views,

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The shape of the UK yield curve implies the market is 100% certain that rates rise 25bps within 6 months but since the curve peaks at the 3yr point at 4.82% and declines thereafter to a 20yr rate of 4.46% suggests longer term views are more sanguine. My opinion is that the market is too sanguine at the long end (which has also been distorted by regulatory changes on pension fund asset allocation) - history suggests the BoE and the market underestimates inflation risks on the upside. My impression is that the latest blip up in HPI was a delayed reaction to the rate cut back in August. It could be a few months before the expected rate hike takes place, so there may not be a retreat in HPI in relation to rates until much later in the year. There's still time for those long property to head for the exit!

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The shape of the UK yield curve implies the market is 100% certain that rates rise 25bps within 6 months but since the curve peaks at the 3yr point at 4.82% and declines thereafter to a 20yr rate of 4.46% suggests longer term views are more sanguine. My opinion is that the market is too sanguine at the long end (which has also been distorted by regulatory changes on pension fund asset allocation) - history suggests the BoE and the market underestimates inflation risks on the upside. My impression is that the latest blip up in HPI was a delayed reaction to the rate cut back in August. It could be a few months before the expected rate hike takes place, so there may not be a retreat in HPI in relation to rates until much later in the year. There's still time for those long property to head for the exit!

Exactly my interpretation.

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The shape of the UK yield curve implies the market is 100% certain that rates rise 25bps within 6 months but since the curve peaks at the 3yr point at 4.82% and declines thereafter to a 20yr rate of 4.46% suggests longer term views are more sanguine. My opinion is that the market is too sanguine at the long end (which has also been distorted by regulatory changes on pension fund asset allocation) - history suggests the BoE and the market underestimates inflation risks on the upside. My impression is that the latest blip up in HPI was a delayed reaction to the rate cut back in August. It could be a few months before the expected rate hike takes place, so there may not be a retreat in HPI in relation to rates until much later in the year. There's still time for those long property to head for the exit!

Hi bearish

Where are you getting this from. BOE here

http://www.bankofengland.co.uk/statistics/...rve/uknom05.xls

Gives a yield curve rate of 4.38% add in an adjustment of 0.15% gives 4.53% nothing near a certain increase in rates.

The BOE do historically overestmate inflation, so as they are expecting it to be about 2% over the next three years, then couldn't we assume that on the past record the BOE will again overestimate?

Edited by kingofnowhere

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Hi bearish

Where are you getting this from. BOE here

http://www.bankofengland.co.uk/statistics/...rve/uknom05.xls

Gives a yield curve rate of 4.38% add in an adjustment of 0.15% gives 4.53% nothing near a certain increase in rates.

The BOE do historically overestmate inflation, so as they are expecting it to be about 2% over the next three years, then couldn't we assume that on the past record the BOE will again overestimate?

Hi bearish

I think I know what you are doing, you are looking at the forward rates as at March 05 not March 06, then the rates are where you say.

Shows how much interest rate expectations have fallen over the last year

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Hi bearish

I think I know what you are doing, you are looking at the forward rates as at March 05 not March 06, then the rates are where you say.

Shows how much interest rate expectations have fallen over the last year

Or it shows how much effort went into trying to jam the rates lower last year.

Well that is looking prestty stupid now with rates rising in nearly every country in teh world.

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The shape of the UK yield curve implies the market is 100% certain that rates rise 25bps within 6 months but since the curve peaks at the 3yr point at 4.82% and declines thereafter to a 20yr rate of 4.46% suggests longer term views are more sanguine. My opinion is that the market is too sanguine at the long end (which has also been distorted by regulatory changes on pension fund asset allocation) - history suggests the BoE and the market underestimates inflation risks on the upside. My impression is that the latest blip up in HPI was a delayed reaction to the rate cut back in August. It could be a few months before the expected rate hike takes place, so there may not be a retreat in HPI in relation to rates until much later in the year. There's still time for those long property to head for the exit!

I predicted HPI of about 8%, CPI inflation will be subdued under this measure, although 'standard of living' measures which have been taken out of the CPI and which were in the old RPI-X will show higher prices. So I am roughly in line with KingofNowhere, but maybe from a different perspective.

A lot of people here just don't realise that a huge drop in living standards has occured and is continuing, and they will be effectively locked out forever with rising liabilities to the state.

As long as millions of people from all over the world are cynically let into this country, by a "Labour" government (lol!) to deflate real wages, and raise profits and rents, then Labour will continue to find it cannot raise its wages while real living costs rise and job insecurity (and poverty) increases.

Edited by brainclamp

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Hi bearish

I think I know what you are doing, you are looking at the forward rates as at March 05 not March 06, then the rates are where you say.

Shows how much interest rate expectations have fallen over the last year

Hi there, no I'm looking at a live market in sterling swaps on Bberg but must get a bigger screen - sorry should have said markets 100% certain of 25bps hike within 12 months (6m rate is 4.64%, 12m 4.76%) - 50/50 within 6 months, 100% within 12 months. The rest is as I said before.

BoE and markets have historically underestimated inflation on the upside and I think that's relevant at this point in the cycle. Wouldn't argue against your point (i.e. BoE overestimates on the downside) but don't think this will be relevant for a while yet.

One other point, I've seen the view expressed elsewhere in the forum that the UK economy can act as a kind of standalone entity, impervious to what was going on in the rest of the world - this is utter nonsense. Be in no doubt that once the Fed, ECB and (particularly) the BoJ start tightening, the BoE will have to follow or face a major currency crisis (no chance they will opt for the latter).

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Hi there, no I'm looking at a live market in sterling swaps on Bberg but must get a bigger screen - sorry should have said markets 100% certain of 25bps hike within 12 months (6m rate is 4.64%, 12m 4.76%) - 50/50 within 6 months, 100% within 12 months. The rest is as I said before.

BoE and markets have historically underestimated inflation on the upside and I think that's relevant at this point in the cycle. Wouldn't argue against your point (i.e. BoE overestimates on the downside) but don't think this will be relevant for a while yet.

One other point, I've seen the view expressed elsewhere in the forum that the UK economy can act as a kind of standalone entity, impervious to what was going on in the rest of the world - this is utter nonsense. Be in no doubt that once the Fed, ECB and (particularly) the BoJ start tightening, the BoE will have to follow or face a major currency crisis (no chance they will opt for the latter).

Hi Bearish

But then you have to adjust these rate expecations for credit risk? IIRC it's 0.15% for six months so an implied rate of 4.99% and it's it's slighlty higher for 12months, so an implied rate of 4.6% or a tad below.

We don't have to follow anyone else on interst rates, we already have the highest in the developed world. If our inflation falls, then they are getting rate increases anyway/

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Hi Bearish

But then you have to adjust these rate expecations for credit risk? IIRC it's 0.15% for six months so an implied rate of 4.99% and it's it's slighlty higher for 12months, so an implied rate of 4.6% or a tad below.

We don't have to follow anyone else on interst rates, we already have the highest in the developed world. If our inflation falls, then they are getting rate increases anyway/

True but then the BoE doesn't extend mortgage finance does it, so maybe the rates banks borrow at is relevant in extending mortgage finance? The base rate, which I thought was the topic of discussion, "is the rate of interest used as a basis by UK banks to make loans to their customers", hence why I look at swaps and not a risk-free measure such as treasuries.

But we don't have the highest rates in the developed world. And in any case, when it comes to avoiding currency instability, its not about absolute levels of interest rates but more about rates of change. Japan, for example, has been pumping liquidity not just into Japan but into the whole global economy with its ZIRP. When this changes it will impact all global currencies. We'll find out in the next 12 months or so.

IF inflation falls, you are right but its not falling. Central bankers around the world are raising rates in order to meet with rising inflation - that's the whole point. Global asset prices have been inflated by historically loose monetary policy since the aftermath of the tech bubble in 2001 - now that the global economy (even Japan after years of deflation) is running at full steam and inflation is rearing its ugly head, its time to turn off the liquidity tap and constrain inflation. When this happens, rates revert to historical mean levels and so do asset prices. The big question isn't if but rather WHEN.

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Kingofnowhere,

We don't have to follow anyone else on interst rates, we already have the highest in the developed world. If our inflation falls, then they are getting rate increases anyway/

Think you may want to check your facts and check what has happened in the past when UK rates were lower than expectations from certain quarters.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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