Wednesday, April 7, 2010

After Australia’s IR increase…

BOE Will Keep Rate at 0.5% Until at Least November, BCC Says

The Bank of England will keep the benchmark interest rate at a record low of 0.5 percent until at least November because the economic recovery remains “vulnerable,” the British Chambers of Commerce said. “In the last forecast, we envisaged an increase to 0.75 percent in August and to 1 percent at the end of the year,” BCC Chief Economist David Kern said in a Bloomberg Television interview yesterday. “If you asked me what I think today will happen, I see the first to 0.75 percent in November or December, and then only next year to 1 percent or higher.”

Posted by alan @ 10:30 AM (2279 views)
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13 thoughts on “After Australia’s IR increase…

  • This sort of prediction is a bit silly, as it demands the ability to gaze into a crystal ball that is decidedly cloudy at the moment.

    There are too many uncertainties, and too much scope for upsets; to make a call on interest rates six months hence..

    It’s a bit like a weather forecaster saying ‘it will stay dry today… …provided it doesn’t rain..’

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  • Property Babe says:

    Which means no house price falls until at least 2011.

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  • I suspect IRs will be flat throughout the year. This is great for people on trackers, but for the rest on LIBOR correlated
    products, it doesn’t really matter; they appear to be creeping up slowly with 3M LIBOR swap rates. Ouch.

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  • Interest rates are a good way to stop an economy overheating and house prices getting out of control..

    Hmm.. massive recession, people losing their jobs left right + centre, yet house prices continued to go up..

    Why the hell they’ve put them so low is madness

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  • economic recovery remains “vulnerable”

    This is the sort of utter nonsense that clueless politicians say in an effort to cover their mistakes and get re-elected. I’d like them to explain how and when an economy is ‘invulnerable’. History tells me that an economy is completely invulnerable and ‘booming’ about 3-6 months before it completely busts.

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  • I don’t think this is so much a prediction as an attempt to influence the BOE. Kern is putting forward the case for rates staying low and hoping the BOE will agree with his logic.

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  • I don’t see why so many people are screaming “Oz is raising their target rate why don’t we?!” – they are a huge commodities exporter, we are a huge manufacturer and tertiary service provider (yes, we /are/ a huge manufacturer contrary to what many here may imply – we are number 6 in the world, which is pretty impressive for our population).

    I would love rates to rise, hurting house prices and boosting my savings rates, but the economy in general would feel huge pressure, I’m with UT on this, it’s pretty murky, but I’ll still give it a go… I think rates will be flat most of the year – probably ending up somewhere between 1 and 1.5% with a slim (but not insignificant) chance of only getting raised to 0.75.

    estrader – you are astute 🙂 “An end to boom & bust” etc…

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  • More of the let’s talk down the pound thing. Is everyone including Mervyn King betting against the pound these days? Economic strategy I guess.

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  • Deflation anyone? LOL, Thought not!

    Some things are more obvious to some than they are to others.

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  • UT, I think you are being a little unfair.
    If you read the guy’s quote, he begins:
    “If you asked me what I think today will happen…”
    I think it is a little unsporting of you to decide his prediction for November without first considering that he might have another opinion tomorrow.

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  • markj69 str05 says:

    I wonder how transparent the personal VI is of all those capable of influency the low IR?

    Perhaps the labour mp’s with property portfolios do not have enough personal wealth to cover the effects of higher IR’s. Larger debts than savings? Maybe the wealthier Tories prefer higher returns on their savings?

    With so much ‘change’ ahead, how anyone can suppose to predict anything is beyond comprehension.

    I expect to hear a lot of nonesense over the next few weeks. But personally, I thing the new gov’t will start making changes pretty quickly. November is 6 mnths after the election. I don’t think they’ll wait that long.

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  • Just FYI

    http://uk.finance.yahoo.com/echarts?s=GBPAUD=X#chart1:symbol=gbpaud=x;range=5y;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;

    GBP buys around 2.5 – 2.8 AUD for the past few years. Now it buys 1.60. AUD is now about parity with USD.

    I suspect there is a huge capital inflow into Australia at the moment, well and above the commodity export strengths. Further,Aussie aren’t that productive really. I am not that bullish about Australian right now…

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  • markj69 str05 says:

    You don’t think there’s some strategic exchange-rate alignment goings-on, do you? £ – Euro, A$ – US$.

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