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Fed Lifts Rates To 4.75 Pct

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Interesting: someone on another site was predicting that this would be the last hike for the time being with just a hnt that there might be more hikes in the future.

Of course if Bernanke has gone from raising rates to merely trying to give the impression that rates will be raised, then the dollar is going to start sliding from here.

Edited by MarkG

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Interesting: someone on another site was predicting that this would be the last hike for the time being with just a hnt that there might be more hikes in the future.

Of course if Bernanke has gone from raising rates to merely trying to give the impression that rates will be raised, then the dollar is going to start sliding from here.

Can someone put this is plain English then on what is going to happen???

This is how I see it and I know f*ck all!!!

Traditionally we have had our IR's 2% lower than the USA. Today not only is the USA within the +/-2.0% boundary it has now passed us. USA now has IR's of 4.75% to our 4.5%. This will put pressure on the pound and mean that instead of getting 1.74 dollars to the pound we could get 1.50 dollars to the pound (example). This means that every barrel of oil at 66 dollars that used to cost us £37.93 its now gonna cost $66 but actual cost is £44.00.

Therefore the price of oil has gone up - we have IMPORTED inflation.

This means that our target of 2.0% will not stay 2.0% and measn there will be pressure to up IR's. But how can raising of IR's in this country improve the strength of the £vs$?

TB

Edited by teddyboy

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I understood that moneycould now be taken away from the Uk by investers and invested in the US as they will provide a better return now with higher rates.

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With the raise in short-term rates today the yield curve must be very close to inverting, if it didn't happen today.

As the saying goes, an inverted yield curve has predicted eleven of the last seven recessions... :rolleyes:

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With the raise in short-term rates today the yield curve must be very close to inverting, if it didn't happen today.

As the saying goes, an inverted yield curve has predicted eleven of the last seven recessions... :rolleyes:

The UK yield curve has been inverted for a fair amount of time. Doesn't seem to have made a jot of difference.

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Guest Riser

Wall Street selling off after the Fed Rate rise.

25bp was widely expected, but the accompanying statement was not as dove-ish as many hoped.

5% is likely now, and some (Lehman Bros.) is now talking 5.5%.

Looks like the six-month cycle selloff may be starting now.

Have a look at the new thread in the Cycles section: "Half Yearly cycle"

Markets see 25% chance that US rates will go to 5.25% by November, what price Sterling then?

Markets see May rate hike as certain, 1 more possible

WASHINGTON (AFX) -- A hawkish statement from the Federal Open Market

Committee has cemented expectations in futures markets that the Fed will raise

interest rates again in May. The federal funds futures market at the Chicago

Board of Trade was pricing in a 94% chance of a rate hike to 5% in May, up from

about 83% odds before the FOMC announcement Tuesday afternoon. The market is

giving about 1-in-4 odds that the fed funds rate will go to 5.25% by November.

The FOMC said high levels of "resource utilization" and high energy commodity

prices could fuel inflation, even if the economy moderates to a more sustainable

growth pace later this year as expected.

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It sounds like a 85% chance of another hike in May, taking us to 5%, and I would guess better than evens chance of 5.25% before the end of the summer.

Merv is going to be feeling the heat. I just can't see how the BoE is going to be able to keep rates at 4.5% without a serious loss of confidence in sterling and UK plc. HPC is well on course - this is as good as it gets for the bulls.

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To the clever day tradery type people - has this affected UK interest rate futures yet?

The BBC Market Data page shows UK Gilt yields jumping up to average 4.44% as a result. I think the full market implications will be seen tomorrow and GBP will/should come under a little more pressure.

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The UK yield curve has been inverted for a fair amount of time. Doesn't seem to have made a jot of difference.

brainclamp, you're not the only one who didn't get it.

Anyway, US interest rates, US yield curve.

It usually takes about a year after the inversion before recession hits.

This man seems to agree...

http://business.timesonline.co.uk/article/...1977308,00.html

Edited by BandWagon

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Does it look like the Fed have a print loads of money but make it more expensive angle going; is that right, can that senario help their deficit?

Or

With the absence of the M3 data are we about to see (or rather not see) contraction and a purposeful squeezing of the American population? I guess if Japan are looking at putting up interest rates then America would respond by raising rates to reduce the effect of carry trade positions being dumped?

I'm thinking aloud (talking out my a) but anything here to seriously ponder?

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The UK yield curve has been inverted for a fair amount of time. Doesn't seem to have made a jot of difference.

But there is a reason for that. Baby boom retirement and lack of desire for risk from Pension funds is swallowing all low risk investment bonds (government, mortgages) as quickly as it can be created. While this continues that yield curve is going to stay invert.

The statement we are in a new world is stated too often when it comes to investments. In this case tho it may be true (possibly until all the boomers retire in 2017 or so).

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Guest STR2004

... Traditionally we have had our IR's 2% lower than the USA. Today not only is the USA within the +/-2.0% boundary it has now passed us. USA now has IR's of 4.75% to our 4.5%. This will put pressure on the pound and mean that instead of getting 1.74 dollars to the pound we could get 1.50 dollars to the pound (example). This means that every barrel of oil at 66 dollars that used to cost us £37.93 its now gonna cost $66 but actual cost is £44.00.

Good shot but not quite right I think. Traditionally UK interest rates have been 1.5% to 2.0% HIGHER than US rates in order to attract investment into the UK. With the US offering better rates why would 'an investor' put their money into the UK when they can get a better rate in the US. The demand for sterling therefore drops and consequently so does its value. Your description from there onwards is correct. A lower value of sterling means it costs more to buy the goods we import and thus we import inflation.

STR

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Seems to me like the UK media speculate each time that "maybe this'll be the last one, or maybe just one more, then that'll be it. The US media seem to say each time "rates rose again today, with no end in sight".

Just my perceptions.

For the record I would expect a raise to 5% at the next meeting.

It's incredible that in the space of 20 months the rate has risen from 1% to 4.75%. I mean, if ours rose more than 4 fold from the recent low, there'd be a bloodbath!! :unsure:

NDL

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Don't forget that 1% is the overnight lending rate, not the long term mortgage rate which has remained above 3% throughout...

And Americans are more likely to take out 30 year fixed rate mortgages, similar to Europe.

Of course this isn't going to help the people who took out low rate ARM's when their repayments shoot up 40%...

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It's really confusing having two users - 'homeless' and 'STR2004' - with the same avatar. Especially when one is a bear and the other a bull, respectively.

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Guest wrongmove

With the US offering better rates why would 'an investor' put their money into the UK when they can get a better rate in the US.

This has certainly been the case for decades now. UK rates have rarely dropped below US, and when they have, Sterling has suffered.

I think the reason we are getting away with that for now is not that the UK is particularly strong, but because the US economy looks such a basket case.

The US have their massive double deficit and are bogged down in Iraq, while the UK economy is actually perceived as being well managed ! (Hard to believe, I agree). But of all the major economies, the UK suffered the least from the post-millenium stock crash fallout. Our unemployment didn't rise, and we never actually recorded a single quarter of negative growth. (Yes, I know we have deficits and involvement in Iraq, but the scale just doesn't compare with the US).

If the US starts to sort out its problems, as it usually does eventually, or the perception of the UK economy changes, then the pound would tank with the current rates, all IMHO, of course. Another possibility is that US rates may climb to 5.5% or above.

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  • 301 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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