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When Do You Think Interest Rates Will Rise Again?


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HOLA441
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HOLA447

I would think the CPI figure would have to hit 4% for that to happpen.

That figure would be double the BoE's target! But I think when the next set of figures are released there will be a few raised eyebrows - something must have pushed the BoE into action after resisting for so long...

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HOLA448

October.

Why? Because by that time the currency markets will have woken up to the Miracle Economy's demise and lighten their sterling positions. Gordon will have to hike to protect the pound and imported inflation.

IN the meantime, the Fed will be at 6% by December.

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HOLA4410

When do you think interest rates will rise again and how high do you think they could go? Discuss.............. :)

2007 based on recent behaviour, at which point average prices will be 1-2% above where they are now.

More and bigger rises are needed to stop the "evil" HPI.

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HOLA4412

I think we will see 5% by year end and 5.25% by Q2 2007.

The global trend in IRs is up.

That is the crucial point.

1. As I understand it, the BoE remit is to keep inflation at or arouind the target. If the inflation figures are above the target the BoE has one choice, to raise IRs to bring spending down. However, the government could always accept a new inflation target, so reducing the need for interest rates to go up.

The trouble with the term 'inflation' is that it is almost a positive sounding word. A bit like 'Credit Cards', which should really be called 'debt cards'

Someone at work the other day said 20% inflation would be good, as in a few years his debt would be gone. I tried to make him realise that it would also mean his money would be worthless too. He didn't get the link between inflation and currency de-valuation. :ph34r:

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1. As I understand it, the BoE remit is to keep inflation at or arouind the target. If the inflation figures are above the target the BoE has one choice, to raise IRs to bring spending down. However, the government could always accept a new inflation target, so reducing the need for interest rates to go up.

Watch out for a redefining of CPI or movement of boundries - means were in for higher real inflation

Someone at work the other day said 20% inflation would be good, as in a few years his debt would be gone. I tried to make him realise that it would also mean his money would be worthless too. He didn't get the link between inflation and currency de-valuation. :ph34r:

His money would be worthless if his wages didn't keep pace - which they are not doing anyway....

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HOLA4415

Belief in the Miracle Economy is still powerful and the currency markets look set to push sterling to the number 1 slot very soon with all other currencies sinking against it:

http://news.bbc.co.uk/1/hi/business/5250250.stm

Sterling heading for $2 barrier
The shock rise in UK interest rates last week has sent the pound jumping higher against the
dollar and other currencies
, a trend that may continue.
Sterling has also risen against the euro and the yen
, helped by the fact that UK interest rates are higher than those in Japan and the European Union....../
"We are revising our forecasts up, and do see the possibility of the pound hitting $2," said Simon Derrick, chief currency strategist at the Bank of New York....../
However a strong pound is bad for the
UK trade deficit
, which hit a higher than expected £6.8bn ($12.4bn) in May as the country imported much more than it exported.
Sterling last reached the $2 mark in September 1992, just before the "Black Wednesday" crisis, when currency speculators forced the UK government to withdraw the pound from the European Exchange Rate Mechanism...../

The high pound is buying Gordon time and may keep inflation lower as imports become cheaper. Then again if we keep up our spending binge......

The deficit could undermine the pound at some point if it becomes all import and no export due to an overlaued currency. It seems that we cannot afford to have the world's highest currency because we don't have the exports to back it up. Just HPI-MEW and importing from China.

http://www.busrep.co.za/index.php?fSection...ticleId=3376367

Buffett 'wrongly times' slashing bet against dollar
August 6, 2006
By George Stein
New York - Billionaire Warren Buffett, stung by $955 million (R6.6 billion) in losses from foreign currency investments in 2005, slashed his bet against the US dollar this year, before its steepest decline in 18 months.
Buffett told investors that he scaled back his holdings of foreign currencies as US interest rates rose relative to the rest of the world.

Did Warren get it wrong or is he cooking something up with George Soros?

Edited by Realistbear
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All I know is $2 to £1 is absurd, I can't believe how much the £ is overvalued relative to the $US. Anyone who has spent any time in the US must surley notice this. We are still only at $1.91 but if it does hit $2 I will be rethinking about where to put my money.

Pound has risen even sharper against the CDN.

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Not exactly on topic but following on from mention of import/exports, what about the current fad for VAT carousel fraud (billions a year?). Does that make our economic position look stronger or weaker than it reallly is? If they strip that out of those figures, are we in more trouble and if so, where do IRs go next? :unsure:

Edited by daiking
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HOLA4418
All I know is $2 to £1 is absurd

Why? When I was going to America regularly in the late 80s/early 90s I remember $2 to the pound being considered normal.

Pound has risen even sharper against the CDN.

Hardly surprising given that the last time interest rates were this high, the pound was around CAD$2.40-2.50.

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HOLA4419

Why? When I was going to America regularly in the late 80s/early 90s I remember $2 to the pound being considered normal.

Hardly surprising given that the last time interest rates were this high, the pound was around CAD$2.40-2.50.

Since that time the US has got massivly richer than the UK. Simply compare growth rates between the two countries.

Spend some time in the US, there is simply nothing in the US that is more expensive than the UK even at $1.70 to the £ let alone $2 to the £2. PPP is massivly stronger with the US already.

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Guest mattsta1964

When do you think interest rates will rise again and how high do you think they could go? Discuss.............. :)

Probably another 0.25% rise before the end of the year

Things wont get interesting until well into next year

I think we are in for a very very rough ride the next 5-10 years, possibly as bad as the great depression. Our credit fuelled lifestyles are in for a hell of a shock.

The bottom line is, you can't prop up an economy on borrowed money dealt out like smarties by a bunch of crooks (Banks). We're a nation of hardressers, sandwich makers, spivs cutting deals and staggeringly naive property speculators who have about as much financial nous as a hamster

Goodbye UK PLC. This country is FUBARED

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All I know is $2 to £1 is absurd, I can't believe how much the £ is overvalued relative to the $US. Anyone who has spent any time in the US must surley notice this. We are still only at $1.91 but if it does hit $2 I will be rethinking about where to put my money.

Pound has risen even sharper against the CDN.

It's not so much a strong Pound, more the case of a very weak Dollar that causes the current exchange rate; the World no longer believes in the US currency because of their failure to contain the twin deficits.

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HOLA4424

It's not so much a strong Pound, more the case of a very weak Dollar that causes the current exchange rate; the World no longer believes in the US currency because of their failure to contain the twin deficits.

Maybe ... but our defecits are worse. Still, the dollar is used extensivly through the rest of the world, Ecudaor for example only uses the dollar and a lot of other countries rely on it. Its in no countries interest for the US to collapse. The biggest problems the US has is its promises (social security) but they can just renage on those without affecting the $US, although it will affect lots of the population of course.

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HOLA4425

When do you think interest rates will rise again and how high do you think they could go? Discuss.............. :)

In this thread, dog points out:

Robert Barrie, head of European economics, said: “It takes more than a quarter-point [rise in interest rates] to make difference to anything. The Bank’s model suggests it reduces inflation by less than 0.1%.

If you're guessing future IR rises, the BoE's own model would appear a sound basis for speculation. If each IR increase of 0.25% reduces inflation by 0.1%, a further increase to 6% is currently needed to bring inflation down from the current level of 2.5% - If inflation rises to 2.8% as UBS predicts, IR needs to go to 6.75%.

It all depends on the accuracy of inflation predictions. My guestimate is a stagflationary IR peak of 7% by late 2007 / early 2008, then cuts to below 4% as we hit deflation Japanese style. If somehow deflation is avoided, IR may need to rise to as high as the level of money printing, which is currently 13.5% and rising in the UK.

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