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Realistbear

U S Money Managers Bracing For 6%

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http://today.reuters.com/investing/finance...ND-BERNANKE.XML

Some money managers brace for a not-so-gentle Ben
Tue Jun 20, 2006 1:07pm ET
Email This Article | Print This Article | Reprints [-] Text [+] By Jennifer Ablan
NEW YORK, June 20 (Reuters) - Federal Reserve Chairman Ben Bernanke was careful last week not to utter a word on the direction of interest rates. But that hasn't stopped portfolio managers and economists from ratcheting up expectations for further hikes later this year.
A growing number of investors and economists say they would not be surprised to see the central bank's fed funds rate target -- currently at 5 percent -- peak around 6 percent.

If Gordon is still standing on the current UK rate while in denial about inflation could sterling come under pressure?

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US I/R will reach 6% but before that the MPC will up ours .25 followed by 5 to 6 further .25 increases by end of 2007.

Anyone want to buy a 2 bed apartment in a northerm city centre for £220K? Wait 2 years and get one for £120K. Just watch.

Pablo Silver or Lead.

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Well going on the last 50 years that means our rate will have to be somewhere between 7% and 8%.

This is going to get very messy in the coming months, if only joe public knew what was coming.

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Well going on the last 50 years that means our rate will have to be somewhere between 7% and 8%.

This is going to get very messy in the coming months, if only joe public knew what was coming.

Questions, thoughts and ramblings from a newbie...most of the speculation about interest rates on here focuses upon foreign interest rates which are thought to impact us in the short term.

If we don't hike our rates in response, then surely the cost of imported goods from these countries will increase in the long term as their factors of production will increase. Therefore, in the long term shouldn't we see inflation of those goods in our CPI basket?

If so, wouldn't the inflation of those goods be out of our control and make it pointless raising the rates? Then what would be the point of having imported goods in the CPI basket?

I'm assuming exchange rates mask inflation and interest rates are closely linked to them. Do inflation rates correllate directly with exchange rates?

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Jesus my heads spinning after that.

From my limited understanding, if world interest rates continue to rise and ours dont then eventually the £ will fall against all the major currencies which will lead to inflation of all of our imported goods sending our overall inflation up. In the end the BoE will have to follow suit or there will be a run on the £.

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A growing number of investors and economists say they would not be surprised to see the central bank's fed funds rate target -- currently at 5 percent -- peak around 6 percent.[/indent]

You would think that would translate to a stronger dollar and weaker pound and therefore pressure on UK inflation and interest rates.

However mysterious forces seem to be at play these days and nothing is predictable anymore.

Jesus my heads spinning after that.

From my limited understanding, if world interest rates continue to rise and ours dont then eventually the £ will fall against all the major currencies which will lead to inflation of all of our imported goods sending our overall inflation up. In the end the BoE will have to follow suit or there will be a run on the £.

UK import inflation is already increasing

It is import inflation and cheaper goods that has kept the lid on services inflation which has been rampant.

So in theory, increases in import inflation could tip the balance and therefore we should see higher inflation in the UK.

But then we've got to contend with Gordon Brown meddling with the CPI basket.

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Thanks for the explanation guys.

Jesus my heads spinning after that.

Sorry mate. My head was spinning as I was typing that :blink:

GB's Miracle formula = Decreasing cost of imported items + Increasing cost of service items = minimal CPI inflation :P

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It's strange how 6% sounds so huge. From what we now know about oil prices and the excess liquidity perhaps it might go further. Everyone assumed oil prices would moderate but they haven't. There is a only a finite period that manufacturers can absorb costs and employees will constrain their wage demands.

The question is: Can we all curb our demand for oil?

Trichet is worth listening to. He said that the interest rates only benefitted debtors and penalised savers. He also harked back to the mess inflation caused in the 70s. Every single country has woken up to this fact apart from our panel of experts of the BoE........... even the BoJ is ready to go.

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  • 335 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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