And They Cut...

[TheCountOfNowhere]

Excellent news.

Inflation is now not being controlled so expect rate rises from here on in !!!

[Bug16]

FTSE now nose-diving to -1.96%

[starsign]

Silly me you are right, they don't care what they are told to do so they did it because inflation is low, debt level is low so people need to spend a bit more what they can't afford, more easy credit needed for the stable economy.

Pull your head out of the sand!

you are entitled to your point of view, I don't agree rates were cut because of the front page of a newspaper. If that helps you to make sense of the world then go for it.

As a previous post says above, targeting medium term inflation of 2% with the view that inflation will rise sharply and then ease, it makes sense.

[Maggot_with_halitosis]

Pushing on a string. The BoE can cut interest all it likes; the high-street banks will maintain their mortgage rates and use the cash they've gained on the increased spread to either lend out (ten times over), plug up any short-term funding shortfalls and/or pay their directors multiple millions of pounds for their financial genius. Very clever; British export business should be facilitated whilst the average Joe still gets the thumbscrew to help cork up inflation.

[Roman Abramovitch]

The FTSE nosedive reminds me of the the first time the USA cut rates and the Dow Jones index plunged.

The USA cut rates again and still the Dow Jones dropped.

No end in sight to the market makers red pens.

[starsign]

Spot on. The BOE's objective is to deliver a 2% CPI 12-24 months out. They're pretty clear in their statement, over the next few months CPI will rise, maybe sharply, but by the end of this year inflation will be falling as the economy struggles.

Seems to me that a 0.25% cut is balanced and sensible. It won't re-ignite house price inflation, in fact it'll do virtually nothing to prevent house prices slipping steadily down for the next few years, so it should be three cheers for Merve from this forum.

IMO, good post.

[234SALE]

HAHAHA

[pmaupoil]

FTSE now nose-diving to -1.96%

That's the opposite reaction. It just shows how powerless CBs are now. It looks like the market is crying for a US-style dramatic cut!

[Bug16]

That's the opposite reaction. It just shows how powerless CBs are now. It looks like the market is crying for a US-style dramatic cut!

And I'm sure it'll have the same effect if it happens.

[FreeTrader]

ECB decision: HOLD

[OzzMosiz]

Well my savings are locked in for a year now, so I don't give a stuff about IR decisions

[234SALE]

Index Value: 5,753.70

Trade Time: 12:45PM

Change: 121.70 (2.07%)

[Wait & See]

FTSE 100 5759.30-1.98%

The market's not responding. They've ran out of ammo for good now.

[auk]

The fall in the FTSE makes perfect sense. The press release could be read as saying

1) The world and UK economy is in serious trouble (True)

2) We expect a serious slowdown in demand. This is deflationary (True)

3) However, medium term inflation expectations are high, largely due to cost pressures (True)

4) We need to reduce demand to counter inflation (True)

5) We don't know whether the demand reduction caused by the forthcoming recession will be enough to counter inflation (Fair enough)

6) At the moment we think that in the medium term the recession will be more deflationary than cost pressures will be inflationary (I agree)

7) Therefore we're cutting rates. This won't have any short term impact, but we hope that in 6 months that it will balance demand so we hit our 2% CPI target (fair enough)

8) But we're still inflation targetters, so we're not going to go Bernanke bonkers (Good stuff)

This is by NO means a loose / inflationary statement. Therefore the FTSE tanks. Sterling is due for a serious correction anyway, whatever happens to interest rates.

Edited February 7, 2008 by auk

[5lab]

'nother £40 a month off my boe tracker too. woo! that'll nicely cover the gas bill

[234SALE]

Index Value: 5,749.20

Trade Time: 12:51PM

Change: 126.20 (2.15%)

[pmaupoil]

ECB decision: HOLD

That's why the continental markets are catching up the FTSE in their fall.

[narco]

FTSE 100 5759.30-1.98%

The market's not responding. They've ran out of ammo for good now.

To be fair I think the market had priced in a 0.5 cut today. Although its fairly obvious that these cuts are becoming more and more impotent.

[234SALE]

Index Value: 5,740.90

Trade Time: 12:54PM

Change: 134.50 -(2.29%)

[oktup]

[...] some of the m0rons so keen to stick the boot in on someone a lot older and wiser than them. Have some respect for your elders clown!

Feeling tetchy today stonethecrows?

Goooooo Merv-IT WILL BE NECESSARY TO INCREASE RATES

God how dense ARE you lot-did you not note the SARCASM as he commented on writing a letter regarding inflation OR note the titters from the audience? No way is he going to cut as hard as the FED if at all. He said that for the longer term he needs to REABALANCE the economy from spending to saving FFS. This is like watching a bunch of chimps trying to figure out how to use a microwave-but thanks, very amusing indeed

Thank you TTRTIR-Christ it was getting like the Ministry of Truth on this thread...this is my take on it too. I don't think he's gonna cut at all-in fact Id put money on a .25% raise in feb. For those so hard of thinking they are still having trouble with it-he has basically said that if he raises rates now it will hopefully prevent things becoming far worse down the line. Sorry goldbugs if this shatters all your hopes and dreams like but I think it's fairly clear that we have to pick a side East or West and in case you hadn't noticed Gordo has been doing the rounds not in the US but in the East. Remember we don't owe the US anything anymore-a HIGHLY pertinent point and as I said before this is NOT just an economical crisis it is a political one.

Ok-it's not intended as disparaging really BUT some people really don't seem to be looking at all the factors involved.

One thing most are forgetting is the Forex market and it's importance and it overshadows the stock markets by several orders of magnitude certainly at this point in time-Im not saying that's right or wrong but that's just the way it is. As someone else pointed out, if the pound keeps tanking it will be deserted-foreign investors won't be attracted by a cut in rates but they WILL be by a hold or raise.

The US got the rest of the world into this mess-are you in the same camp as cgnao suggesting the rest of the world is about to jump off the same cliff like a bunch of lemmings if it can be avoided? Hardly!

Now, IF the BoE were going to cut they would announce it loud and clear through a megaphone so all the Daily Snail readers, floor traders etc could jump up and down and celebrate with little party poppers and the lot, the silly bankers in the city could get on with frying us all through their stupidity and greed unabated and all the BTL landlords in the land would be chuffed to bits thinking this is some good thing. The fact is though that due to the credit crunch as the US are about to discover, cutting rates NOW is about the most retarded, short termist delay tactic possible making the eventual outcome far worse. Forget all the usual 'commitee vote' cr@p-this is an international emergency and believe you me that will be by the wayside on this occasion.

China has inflation currently running at 18% already-they have got to deal with that. Europe is saying they are more concerned with inflation too and the FEDs actions won't suit our circumstances or indeed those of the US in the long run.

At a political level, as Ive said-Gordo is a SOCIALIST through and through. We have now paid off our WW2 debts to the US-we owe them nothing and are therefore no longer politically shackled to them. Think Pet Shop Boys only the song title would be 'Go East' instead

[sign_of_the_times]

'nother £40 a month off my boe tracker too. woo! that'll nicely cover the gas bill

Woo, was that one of those special "Neither Tracker" mortgages only available to HPC Neithers ?

seems like you've all got one of those

[Wait & See]

Another "Emergency" rate cut could be on the cards here if the FTSE keeps falling.

[whoami]

Before everyone gets their pants in a twist over the "weak" BoE its worth remembering that we still have considerably higher interest rates than Euroland and the US (and, obviously, Japan) - the current monetary stance is by no means loose.

Reading the BoE comments is illuminating. Interest rates do NOT have some magical instant impact on inflation or growth - it takes some time for these things to work themselves into the real economy. The reason that stock markets react so quickly to interest rate changes is that their value is based on medium/long term expectations, and thus its reasonable to expect them to adjust immediately.

The almost inevitable increase in inflation in June/July of this year could not possibly be avoided by tightening now.

It remains to be seen whether inflation in Q4 08 will be "on target" or not, but its certainly fair to say that the "demand pull" elements of inflationary pressures are likely to be a lot weaker. It's a fallacy to suggest that a few bps reduction in interest rates will suddenly result in a ramp up of corporate investment or consumer spending. Confidence is far too low for this.

What will (probably) continue to weigh are "cost push" pressures (higher gas prices/food etc).

Of course, none of this will have much of an impact on the inevitable HPC. The only thing that lower interest rates will alter will be the pace of decline. Being a leveraged investment, in a downturn the expected return on residential property (and therefore their attractiveness as an investment) is driven far more by expected captial depreciation than by the cost of debt.

Couldn't have put it better.

[Levy process]

What, you mean the sky isn't falling in

Gosh, is that you telling us how optimistic you are about the future again? Sadly, that isn't going to make any difference to reality, because all the stats are showing that not enough people feel the same. Too bad, eh?

[The Spaniard]

The fall in the FTSE makes perfect sense. The press release could be read as saying

1) The world and UK economy is in serious trouble (True)

2) We expect a serious slowdown in demand. This is deflationary (True)

3) However, medium term inflation expectations are high, largely due to cost pressures (True)

4) We need to reduce demand to counter inflation (True)

5) We don't know whether the demand reduction caused by the forthcoming recession will be enough to counter inflation (Fair enough)

6) At the moment we think that in the medium term the recession will be more deflationary than cost pressures will be inflationary (I agree)

7) Therefore we're cutting rates. This won't have any short term impact, but we hope that in 6 months that it will balance demand so we hit our 2% CPI target (fair enough)

8) But we're still inflation targetters, so we're not going to go Bernanke bonkers (Good stuff)

This is by NO means a loose / inflationary statement. Therefore the FTSE tanks. Sterling is due for a serious correction anyway, whatever happens to interest rates.

I like to look at the price movements of Index-linked Gilts as a guide to short, medium and long term inflation expectations.

Shorts are up, indicating short term inflation expectations are up.

Longs are down, indicating that deflationary pressues are expected to outweigh this longer term.

I assume that there are sophisticated mathematical modellers and traders out there who influence the market.