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Flat Bear

August Rate Hikes In Japan And Europe?

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There has been many commentators within and outside the Japanese banking system who expect rates to raise by at least .25% in August. It has been estimated as a 79% likelyhood although I dont understand how they could come up with such a percentage chance. There are calls, internally, for a much higher hike with some advocating that a 1% would be necessary! as major ongoing imbalances within the "carry trade" is causing major global stresses. There has been some counter arguement from some of the manufacturing lobbyists to keep any tightening gradual. The result will nearly certainly be another small rise of .25% which much of the market has already built in.

The ECB have penciled in a rise in August or September and with inflationary pressures in Germany growing by the day an August hike is becoming more of a certainty.

In turn these hikes will put pressure on the US and BOE.

It is quite probable that the BOE will be forced to raise rates by November at the latest and there is a possibility two hikes would be needed before year end. Any hikes from here on in will be forced. I still havnt heard the term "global" pressures or markets being used yet though.

The US, at some stage in the not too distant future, could find themselves forced to raise their rate to simply defend the dollar.

At some time during this tightening process GDPs will turn and the fourth recession since WW2 will be the result.

It is interesting to note that all three previous recessionary periods, which also accompanied the three periods of negative house price growth (crashes) were preceded by a cycle of interest rate rises of 3% or more.

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I don't think the ECB meet in August - European holidays and all that. I expect a rise from them in September though, and more likely a Japanese increase than not at some point over the next three months.

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I don't think the ECB meet in August - European holidays and all that. I expect a rise from them in September though, and more likely a Japanese increase than not at some point over the next three months.

just as many nations were obliged to trash their currencies in sympathy with the US after 2001, there is now (as predicted by many on here for some considerable time) a clear pattern of competitive hikes as each currency is forced to raise rates in some sort of harmony. One consequence of globalisation - non-existent currency controls, hot money flows, and global cycles in IRs.

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The US, at some stage in the not too distant future, could find themselves forced to raise their rate to simply defend the dollar.

Not sure the US wants to defend the dollar, in fact they want the dollar to fall against the Yuan.

The problem is what happens to US based debt. In some senses its great for the US if the dollar devalues, almost all US debt is denominated in $US, so they effectivly owe less.

The consequence of that will be foreign companies buying up US assets instead of buying bonds etc. That istn't going to go down to well in the US politically, but is likely to happen if the currency devalues.

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