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The Masked Tulip

Base Rates - Where Do We Think We Are Going Next Month?

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With March approaching at the end of the week, and having a month to digest the last IR cuts, where do HPCers feel that IRs are going in March with the BOE, the Fed and even the ECB? Is inflation under control? Will they raise or will they focus on the housing market and the perceived recession and lower again? Thoughts please.

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The MPC will announce that there is no change.

The following week there will be planted stories in Brown-friendly newspaper columns suggesting that the MPC terms of reference are amended, specifically relating to looking at whether it's inflationary remit should be reduced in importance.

[edit; couldn't decide whether "terms of reference" is singular or plural]

Edited by Paddles

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With March approaching at the end of the week, and having a month to digest the last IR cuts, where do HPCers feel that IRs are going in March with the BOE, the Fed and even the ECB? Is inflation under control? Will they raise or will they focus on the housing market and the perceived recession and lower again? Thoughts please.

Hold

Merv has indicated that there is only one more interest rate cut to be had to maintain inflation at 2% two years out.

They will want to keep that cut in reserve for a few months.

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With March approaching at the end of the week, and having a month to digest the last IR cuts, where do HPCers feel that IRs are going in March with the BOE, the Fed and even the ECB? Is inflation under control? Will they raise or will they focus on the housing market and the perceived recession and lower again? Thoughts please.

It's a cut, you know it, I know it, even the stockmarket knows it.

Irony is it will do sfa for mortgage lending rates as the banks will not be passing it on. Also I reckon we are now in a new competition being held by the banks as to who can set the highest rates.

As the Chinese say "May you live in interesting times".

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It's a cut, you know it, I know it, even the stockmarket knows it.

Irony is it will do sfa for mortgage lending rates as the banks will not be passing it on. Also I reckon we are now in a new competition being held by the banks as to who can set the highest rates.

As the Chinese say "May you live in interesting times".

Its not a cut this time. April is a different matter however.

As for mortgage standard variable rates. rates will be quietly raised over the two months at 0.05% intervals. The base rate cut will then be passed on, and a couple of weeks later a new set of quietly implemented 0.05% raises will start.

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Plus it's becoming increasingly obvious that IR reductions are failing to have any meaningful effect on consumers' spending power. Mortgage lenders are not, as a general rule, passing them on, but instead using them to cover their own increased costs resulting from the credit crunch. Add to that skyrocketing inflation on most non-discretionary outgoings (food and fuel being the main ones), and even Bernanke-scale IR cuts won't make things rosy in the garden anymore. Merv knows (and I suspect he knows all along) that another 25 basis points here or there won't bring people's mortgage payments down, but it will stick the price of all imported fuel and foodstuffs up: so there's no point.

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Hold.

There is a serious inflationary thread and a recognition personal debt levels need to reduce. The BoE is not interested in creating an environment for further indebtedness.

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So are short term fixed rate bonds, say of 6 months, preferable to variable rate accounts? My gut keeps telling me that longer term IRs are going to have to rise but I suspect, short-term, we will see the BOE do what Brown wants and cut by at least 0.25%

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My gut keeps telling me that longer term IRs are going to have to rise but I suspect, short-term, we will see the BOE do what Brown wants and cut by at least 0.25%

What Brown wants is irrelevant. The BOE will continue to do what it's done in the past and follow along behind the money market like the ever-wagging tail on a puppy.

The market doesn't seem to think that the near-term domestic growth outlook is any weaker or stronger...

http://www.swap-rates.com/UKLibor_extended.html

... than it is today. Perhaps it'll change its view. But it'll signal that, a good three months before the BOE reacts to its master's call.

The longer-term outlook...

http://www.swap-rates.com/UKSwap_extended.html

... shows additional weakness, at the 12-24mo mark. Keep an eye out for movement (both temporal, and magnitude) there. We can already see that this spread has narrowed (demonstrating an ever-so-slightly firming outlook) in the last week's pricing - as have the spreads for the 3-6, and 6-12mo views from the first link.

edit: significant boneheadedness (hopefully) removed. again.

Edited by ParticleMan

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  • 292 Brexit, House prices and Summer 2020

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