Tuesday, September 9, 2008

Interest rates on the way down soon …..

British Pound Experiences Heavy Volatility Trading in Massive 500 Point Range

The DailyFX reckons the record falls in factory input and output prices are causing futures markets to price in large IR cuts by the BoE. "Thus, from a fundamental perspective, downside risks remain for the British pound. However, the currency is also greatly oversold, and as Senior Strategist Jamie Saettele notes, the British pound could be nearing a turning point." But the softening economy and broke banks should put paid to any house price rebound. Unless Gordon starts fiddling with the Special Liquidity Scheme of course....

Posted by voiceofreason @ 04:42 PM (1202 views)
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10 thoughts on “Interest rates on the way down soon …..

  • The point of reducing the interest rate for international trade is to reduce the value of the currency, is it not? Already done, so Darling’s jawboning has fixed that bit.

    Reduce interest rates to allow cheaper borrowing from the central bank? What’s the point? Didn’t work in reducing US mortgage costs and won’t work here either.

    Input prices slid 2% almost all from oil – so do we change our interest rate straight away? Did we jack our interest rate up with the increased cost of oil? If we;re going to do this, why don’t we just tie it to the price of oil? That would be fun.

    5% is historically a low interest rate already. All I can see if we reduce interest rates is banks increasing their margins, and any money supply increase being countered by credit deflation anyway – just like America. BoE’s already pumped in £200 billion, how much more is needed?

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  • The weakening Pound will increase exports thus ameliorating some of the effect. This data does not increase the likelihood of interest rate cuts in my humble opinion.

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  • “BoE’s already pumped in £200 billion, how much more is needed?”@beartil2010

    ….how much more alchohol does an alchoholic need, or drugs for a drug addict, or in this case bankers needing cheap taxpayer/ printed money to pay bonuses and cover self inflicted loses. Such is the way of Capitalism. If the taps open someone will always be drinking.

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  • voiceofreason says:

    beartil2010, Robert Peston on the Beeb says pretty much the same here :

    “Even if there were a sudden increase in the availability of wholesale funding, our banks are not going to start lending 100 per cent mortgages to first time buyers or providing unlimited funds for buy-to-let landlords.

    The shortage of credit will persist, because banks only want to lend to a minority of borrowers who are rock solid.

    In other words, the Treasury’s agonising about whether to use taxpayers’ money to underwrite the mortgage market may be fatuous – in that banks wouldn’t lend much additional money even if they had it.”

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  • More to the point VoR is that if there was an amount that the BoE could lend that was so great that the banks DID start lending 100% mortgages to dodgy credit risks – how could they justify doing it? The fact that it is clear what is happening means that it will also be clear – if the BoE hit that magic amount – that they are using tax payers money to get bad credit risks into huge amount of debt. The party is over, and no matter what they try the game is up.

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  • voiceofreason says:

    I really really hope so 🙂

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  • Ditch the SLS, and the let banks that haven’t alredy got thier companies in order “Burn!”. They have had over a year!

    No more stoopid payouts for being a lousy CEO, They fooked up and the share holders didn’t give a feck about risk management when they where chasing returns.

    There is bound to be some good one’s left and if not pump the treasury money into setting up one that can manage risk! Hell in 5 years you could privatise it and make some money for the tax payer, instead of pouring it down a black hole.

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  • I really hope so guys. I don’t think I could take watching house prices go up again because Gordon did something monumentally stupid.

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  • [email protected]:

    Input prices down 2% due to oil?? The raw Brent crude price has just dropped below $100, making it down approximately 32% since the 14 July peak. The graph (https://www.theice.com/marketdata/brentCrudeFuturesView/brentIndexView.jsp) is looking increasingly like a burst bubble ($99 price not on that graph yet, but trading at $99.43 according to the homepage right now).

    My feeling is that any deflation will be a correction of the inflation we’ve suffered over the past year caused by the high oil price and other commodity speculation – it’ll be an anomaly caused only by the frame of reference for the statistics.

    The oil bubble goes right back to 1999, not coincidentally when the housing bubble started to inflate. Both were due to excess credit availability. The oil bubble was much more severe of course, the peak price being seven times the price in 1999, and doubling between July 2007 and July 2008 as investors pulling out of CDOs piled into oil – piling rapidly out again as the supply-and-demand argument was revealed as nonsense by the US Federal Highway Administration’s Traffic Volume Trends estimate of vehicle mileage, which had dropped by nearly 5% year-on-year by June’s estimate. (http://www.fhwa.dot.gov/ohim/tvtw/08juntvt/page3.cfm).

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  • An independant BoE will end the SLS on the due date in October because that is their stated aim already. If it doesn’t the BoE is not indepentant. doh!

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