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Kings Says Irs To Rise

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Very interesting article. They actually discussed at .5% rise!

"King also hinted that there was a debate at last week's interest rate

meeting of the Monetary Policy Committee about the merits of a half point

interest rate increase to 5.75 pct instead of the quarter point rise enacted."

We should not forget that Fiona at the Nationwide has warned of a crash if rates rise to 5.75%!

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http://news.bbc.co.uk/1/hi/business/6660891.stm

Storm Clouds :unsure:

Rate rises

Analysts said that the Bank's view on inflation was little changed and probably would point to more interest rate increases in coming months.

"The Bank continues to see medium-term inflation risks tilted to the upside, which confirms that the tightening bias remains intact," explained David Brown of Bear Stearns.

"The window of opportunity for higher rates is over the next three months."

:(

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http://news.bbc.co.uk/1/hi/business/6660891.stm

Storm Clouds :unsure:

Rate rises

Analysts said that the Bank's view on inflation was little changed and probably would point to more interest rate increases in coming months.

"The Bank continues to see medium-term inflation risks tilted to the upside, which confirms that the tightening bias remains intact," explained David Brown of Bear Stearns.

"The window of opportunity for higher rates is over the next three months."

:(

What I find so incredible, the majority of people didn't see this coming.

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Aren't the BoE trying to manage people's expectations, to "talk down" inflation / HPI?

Not that I doubt there will be another rate rise, but the more they talk about higher IRs the more people more weary

I think that's the idea, dissuading people from borrowing more now will put less upside on inflation. It will have the same effect as higher rates.

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Very interesting article. They actually discussed at .5% rise!

for about .5 seconds no doubt. I don't think they'll raise next month.

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Great article, thanks for posting.

Seems to point to a most likely scenario of interest rates moving up to 5.75% in Q3 this year, with a possibility of them going slightly higher, and then staying at this level for twelve months. Given that Centrica are curently talking about the possibility of domestic energy prices moving back up I wouldn't be surprised to see interest rates hit 6%.

The credit noose is slowly tightening.

As fixed rate mortgages re-set, and the credit-card bills pile up, we'll hear the squeals of pain and protest getting louder. BTL landlords will increasingly scratch their heads and wonder why they're subsidising their tenants without any capital gains. And the media will run more and more alarming stories about the property crashes in the US, Spain, and Ireland and speculate if the HPC spectre could be heading for the UK.

At some point the more nervous or disillusioned BTL landlords make a dash for the exit, and at that point the media stops speculating and starts pointing to hard statistics demonstrating actual, nominal house price falls.

Hold fast STR's, the end's in sight!

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I agree that few will expect them to raise in June. This is why it would be highly effective to do so, sending a message that they fully intend to contain 'infation'.

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Aren't the BoE trying to manage people's expectations, to "talk down" inflation / HPI?

Not that I doubt there will be another rate rise, but the more they talk about higher IRs the more people more weary

Yes, I hope so. It will speed up the HPC!

Edited by tara747

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What I find so incredible, the majority of people didn't see this coming.

Slowly, slowly, catchy monkey!

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The BOE inflation report says the risks are balanced but more upside over the medium term (i.e. the time frame they are supposed to target !). Since they've overshot inflation for the past 12 months should they not be increasing rates now to ensure they don't end up chasing inflation?

PS I'll be amazed if rates increase in June as well as May. They'll give it 3 months to see if the wind changes direction or if the stars align in the right formation !

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The BOE inflation report says the risks are balanced but more upside over the medium term (i.e. the time frame they are supposed to target !). Since they've overshot inflation for the past 12 months should they not be increasing rates now to ensure they don't end up chasing inflation?

The inflation target they use excludes anything directly effected by interest rate changes, unlike RPI.

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To be quite honest, the quarterly Inflation Report is incredibly fluffy and it signals to me that the MPC do not agree as to what direction inflation is headed. The February Report stated that a rate hike was required in the second quarter, if inflation was to return to the target rate. That sent a very clear signal to markets and the MPC, true to their word, have delivered on it. May's Report sees the MPC renege on their responsibility and their projections for inflation are based on 'market expectations' on interest rates, as opposed to the MPC's view. Why the shift in responsibility from February to May? What are they being paid for? It is the role of the MPC to signal to markets where interest rates might be headed and not for the MPC to take their lead from markets. While it might seem a clever way of projecting the way forward, it appears to me that there must be deep division within the MPC on the inflation debate and that division is prohibiting them from giving any clear direction. Kings' introductory statement alludes to the fact that not all members agree with the inflation projections in the report.

The BoE will again have the luxury of having access to the latest CPI report, prior to it being published, at their next meeting in June. This leaves open the possibility of the MPC making another decision in knee-jerk fashion, based on the outcome of that Report. And if the Bank hikes, King can point to the fact that the market was expecting a hike (soon) and it was already priced it in. And if they don't, King can just say the Bank never gave a commitment to hike nor any indication of timing.

It will be very interesting to read the minutes of this month’s MPC meeting when they are released next Wednesday. But I have to say that this Inflation Report is a kop-out if ever I saw one and King's performance as Governor is nothing short of being pathetic at this stage. At a time when the economy and markets need leadership from the Bank of England, its Governor proves himself to be the weakest link. It is abundantly clear he does not have the requisite influence on the other members of the MPC in the same way as other Central Bank leaders.

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There's an interesting comment in the BoE's latest prediction, saying that the MPC have assumed a further 10% fall in utility prices even after the current round has worked through into the calculations. Then there is further comment that effectively says "However, we are only guessing". This sheds a little light on the fan charts....for me, it's still not clear enough how they are arrived at.

Edited by colonel faulkner

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It is most interesting to see how the hacks are responding to it though. Inherent bullish spin is weakening.

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This sheds a little light on the fan charts....for me, it's still not clear enough how they are arrived at.

if they are derived from market expectations, then I think it simply reflects that no-one has been brave enough to make a call about where rates will be 24 months down the line - so the value simply reverts to base (i.e. current levels)

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PS I'll be amazed if rates increase in June as well as May. They'll give it 3 months to see if the wind changes direction or if the stars align in the right formation !

I tend to agree. But that won't mean a respite for the over-indebted British consumer. Even at 5.5% interest rates their heads are underwater, it's just that many of them don't know it yet.

At current interest rates their credit card balances will get worse each month, fixed rate mortgages will reset to much higher rates, the 300,000 new BTL landlords in 2006 will see their assumptions unravelling before their eyes, and the media will run more stories raising the HPC spectre.

5.5% will get the job done. 5.75% will do it fast.

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Very interesting article. They actually discussed at .5% rise!

"King also hinted that there was a debate at last week's interest rate

meeting of the Monetary Policy Committee about the merits of a half point

interest rate increase to 5.75 pct instead of the quarter point rise enacted."

We should not forget that Fiona at the Nationwide has warned of a crash if rates rise to 5.75%!

I think the party officially will kick off when the rates rise to 6% and if that happens by 0.5% rise that would be the icing on the cake :P

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I tend to agree. But that won't mean a respite for the over-indebted British consumer. Even at 5.5% interest rates their heads are underwater, it's just that many of them don't know it yet.

At current interest rates their credit card balances will get worse each month, fixed rate mortgages will reset to much higher rates, the 300,000 new BTL landlords in 2006 will see their assumptions unravelling before their eyes, and the media will run more stories raising the HPC spectre.

5.5% will get the job done. 5.75% will do it fast.

Loans are getting dearer too! Asda (IIRC) has just raised its best loan rate by ONE PERCENT.

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Rate rises have been averaging out at .25% every three months. I think we will hit 6% in November – if the next one comes in June or July they will hold off raising again till November - just like they did after the January 'shocker'. Unfortunately I don't think they have the balls to deviate from the .25% raise per three month average. Hopefully I stand to be corrected :)

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Aren't the BoE trying to manage people's expectations, to "talk down" inflation / HPI?

Not that I doubt there will be another rate rise, but the more they talk about higher IRs the more people more weary

You are absolutely correct and they have done the same thing a few times now. I think we must take it as given that the CPI figure will edge downwards over the next 2 months, I would guess a trough of 2.4 as this would sort of vindicate Mervs statement of CPI dropping towards 2% over the next few months. BUT then the only way is up, which the mpc is well aware of. Next hike of just .25 not until September in my crystal ball. This talking down inflation is really going to have no effect at all, it will be like recycling plastic bottles to stop global warming :lol: Merv. must be thinking about retirement about now, if he has any brains he will get out by the autumn. Expecting Merv to stand down shortly?

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