BOE 3rd November Rate Announcement

[OoopsVoss]

isaldiri said:

You do realise you posted that at 1847 UK time right? that was a good 47 minutes after the FOMC rate decision......

I didn't type it then. Was too busy looking at the Treasuries yields, driven off less long term debt issuance.

It's meta joke anyway.... which can't be meta if I'm pointing it out....

Zero surprises from BoE.

[HustleRussell]

OoopsVoss said:

It's meta joke anyway.... which can't be meta if I'm pointing it out....

It's funny how the only one which was somewhat marginal you got wrong

Even the best soothsayers get it wrong sometimes I suppose

[Phooey]

isaldiri said:

You do realise you posted that at 1847 UK time right? that was a good 47 minutes after the FOMC rate decision......

Yeah I clocked that but couldn't be arse to point it out

[Mr Whippy]

DonkeyApple said:

It does get generally easier to predict as time decays.

It would certainly be a surprise for the BoE to raise and judging by US market action one can surmise that some people are now betting that the FED is done?

People were expecting the Fed to do all sorts. The reality of what they have done has only just sunk in.

I think it's fair to say that in an environment where the Fed is fighting inflation, they'll work against the consensus view.

Ie, people betting the Fed are done will be positioning their capital in an inflationary way.

[Saweep]

So what do we all think is gonna happen re inflation?

It's clear the economy can't actually handle any more rate rises without things going South in a big way.

So what happens next, if the old mantra of rates being above inflation to keep a lid, given that inflation is still above IR?

[OoopsVoss]

HustleRussell said:

It's funny how the only one which was somewhat marginal you got wrong

Even the best soothsayers get it wrong sometimes I suppose

Its not magic though. A donkey should be able to predict what they are going to do 90% of the time (within a month - unless you get black swanned). The one I got wrong was probably me erring on internal bias and wanting to avoid another thread going into a Brexit fight.....

What is more tricky to predict; when the cuts are coming. 10 year gilt yields down about 15bps today..... 2year also down 10 or so.... Its got to be next year.

This hiking cycle looks to be done. There needs to be an external event to push rates up now. The CBs might be data led, but they are also listening to the earning reports.

[DonkeyApple]

Saweep said:

So what do we all think is gonna happen re inflation?

It's clear the economy can't actually handle any more rate rises without things going South in a big way.

So what happens next, if the old mantra of rates being above inflation to keep a lid, given that inflation is still above IR?

Looks set to keep coming down. Rents look more stable down the line, utilities will keep coming back down as we pay off the Russian/German spike, cars are almost entirely debt driven so coming down now more firmly, lots of businesses starting to discount etc. China must export or die, has rising inventories and can undercut almost anyone so they look set to give European tat manufacturing a kicking. I think the stuff that we can see does all look to be ticking down or about to and we might be easing back from full employment now.

[Mr Whippy]

Soft landing ahoy

I think a recession is a given. Full-on deflation now a risk.

If things were this easy to manage we wouldn't be here to start with.

[isaldiri]

DonkeyApple said:

Saweep said:

So what do we all think is gonna happen re inflation?

It's clear the economy can't actually handle any more rate rises without things going South in a big way.

So what happens next, if the old mantra of rates being above inflation to keep a lid, given that inflation is still above IR?

Looks set to keep coming down. Rents look more stable down the line, utilities will keep coming back down as we pay off the Russian/German spike, cars are almost entirely debt driven so coming down now more firmly, lots of businesses starting to discount etc. China must export or die, has rising inventories and can undercut almost anyone so they look set to give European tat manufacturing a kicking. I think the stuff that we can see does all look to be ticking down or about to and we might be easing back from full employment now.

Inflation is a massively lagging indicator after all and now without the political impetus of having to be seen to be doing 'something' and with the large energy related roll-off due shortly, inflation while high will be 'acceptable' so the central bankers will probably try to use the opportunity to wait rather than do anything further until their hand is forced by events with the economy going south in such a way they have to act once again by hacking rates and/or expanding their balance sheets but until then economists will just keep bhing about what R* aka neutral rate of interest actually is and whether a 25bp move either way will dramatically change things (it won't but that's never stopped economists arguing).....

[Ed.Neumann]

I do worry the BOE is not actually getting out and speaking to businesses enough. They look at historic data too much, looking at inflation from last quarter is looking at data that is already 12 months out of date in many cases.

Speaking to business, who are costing now, for 3, 6, 9, 12 months ahead, many are saying prices are down, not pre covid down, but where they saw a 20% increase during lockdowns etc. many are seeing it go back maybe 10 or even 15% for orders being placed now.

So not only a slow down in inflation, but actually seeing some deflation.


I'm sure they must have boots on the ground speaking to all industries, but you do wonder.

[Teatowell]

I attended a talk from Michael Saunders recently (ex MPC) member. He basically said aside from the days of meetings involved they’re endlessly out talking to business owners of varying types from across the UK to understand what is happening at the coal face so to speak.

I’d guess that’s unlikely to have changed so would have thought they have that covered data aside. But bearing in mind whatever the MPC are doing the effect is so lagged it’s always going to feel very disjointed to reality.

[Panamax]

Brilliant work by the Bank of England,

"UK retail sales fell unexpectedly in October, adding to the impression that a string of interest-rate hikes designed to beat down inflation is beginning to stymie economic activity."

[Double Fault]

Panamax said:

Brilliant work by the Bank of England,

"UK retail sales fell unexpectedly in October, adding to the impression that a string of interest-rate hikes designed to beat down inflation is beginning to stymie economic activity."

Indeed....went into panic mode rather than raising earlier and at a slower pace to gauge impact.

[Deesee]

Double Fault said:

Panamax said:

Brilliant work by the Bank of England,

"UK retail sales fell unexpectedly in October, adding to the impression that a string of interest-rate hikes designed to beat down inflation is beginning to stymie economic activity."

Indeed....went into panic mode rather than raising earlier and at a slower pace to gauge impact.

The target is 2% inflation, however retail is seeing higher pricing & lower volumes which is another issue with the threat of deflation.

Interest rate rises seem to be also doing the job in the euro zone sep 4.3% to oct 2.9%.

Interest rates too low for too long, & too much QE.

[Mr Whippy]

Deesee said:

Double Fault said:

Panamax said:

Brilliant work by the Bank of England,

"UK retail sales fell unexpectedly in October, adding to the impression that a string of interest-rate hikes designed to beat down inflation is beginning to stymie economic activity."

Indeed....went into panic mode rather than raising earlier and at a slower pace to gauge impact.

The target is 2% inflation, however retail is seeing higher pricing & lower volumes which is another issue with the threat of deflation.

Interest rate rises seem to be also doing the job in the euro zone sep 4.3% to oct 2.9%.

Interest rates too low for too long, & too much QE.

This again?

It’s clear that 9 times in 10 inflation doesn’t go away without tightening financial conditions, and that that always causes a recession.


The recession is the tool to curb inflation.


Anyone who believes in soft landings, I have some magic beans here for you too

[DonkeyApple]

Double Fault said:

Panamax said:

Brilliant work by the Bank of England,

"UK retail sales fell unexpectedly in October, adding to the impression that a string of interest-rate hikes designed to beat down inflation is beginning to stymie economic activity."

Indeed....went into panic mode rather than raising earlier and at a slower pace to gauge impact.

Historically, they have raised at a very slow rate. This cycle began in March '21, two and half years ago and was well telegraphed in advance. And the objective was to curb non essential spending by consumers on the home front.

It's also the case that rate rises are merely phase 1. Phase 2 is the slowdown as a result of them. It's always annoying that the media link and end to rising inflation or rates to the end of the situation when in fact it marks the start.

The Churchillian quote 'Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.' is apposite for significant rate changes as an economy moves to a new phase.

I think they should have banged in the first raises quicker but I suspect they were hesitant as no one had seen a post Covid type event before and we had no idea whether the economy would race or collapse. Everyone was surprised how robust the recovery was in the end.

In regards to the latest inflation data the devil does appear to be in the detail. It came down really just in the back of the energy price cap coming down which in some ways means SFA. Other essential goods and services remained relatively unchanged. More importantly, there was a rise in owner occupier housing costs which I'm guessing is higher mortgage rates beginning to filter through?

And just going back to retail sales, if a business is highly geared and sells goods or services that no one needs and targets middle to lower income consumers then the moment rates started rising they were fked and set to be front and centre of any gangbang.

Edited by DonkeyApple on Friday 17th November 11:26

[Panamax]

DonkeyApple said:

In regards to the latest inflation data the devil does appear to be in the detail. It came down really just in the back of the energy price cap coming down which in some ways means SFA. Other essential goods and services remained relatively unchanged. More importantly, there was a rise in owner occupier housing costs which I'm guessing is higher mortgage rates beginning to filter through?

I think that's the unfortunate reality.

DonkeyApple said:

And just going back to retail sales, if a business is highly geared and sells goods or services that no one needs and targets middle to lower income consumers then the moment rates started rising they were fked and set to be front and centre of any gangbang.

Yes, timing can make a big difference. Earlier this week I was reflecting on the different fortunes of Thorntons chocolates, sold to Ferrero for £112m after being completely nailed by the GFC, and Hotel Chocolat now sold to Mars for £534m. The GFC crucified Thorntons chain of shops when customers realised it was so easy to cut back and just buy some chocolate in Tesco.

I had a reservation on at Coq d'Argent for next Monday lunchtime anticipating their £35 Set Menu. Email from them today says they're stopping that menu this weekend and Monday would be either Festive Set Menu at £70 a head or their full a la carte. Crisis? What crisis? (Realistically £125 to £150 a head after wine, sides and 15% service charge. Reservation cancelled.)

[Deesee]

Mr Whippy said:

This again?

It’s clear that 9 times in 10 inflation doesn’t go away without tightening financial conditions, and that that always causes a recession.


The recession is the tool to curb inflation.


Anyone who believes in soft landings, I have some magic beans here for you too

Soft landing has seemingly happened…

Personally I’d have gone with recession, rather than the next step of deflation, but there u go…

Good luck chaps!

[princeperch]

Panamax said:

Yes, timing can make a big difference. Earlier this week I was reflecting on the different fortunes of Thorntons chocolates, sold to Ferrero for £112m after being completely nailed by the GFC, and Hotel Chocolat now sold to Mars for £534m. The GFC crucified Thorntons chain of shops when customers realised it was so easy to cut back and just buy some chocolate in Tesco.

I had a reservation on at Coq d'Argent for next Monday lunchtime anticipating their £35 Set Menu. Email from them today says they're stopping that menu this weekend and Monday would be either Festive Set Menu at £70 a head or their full a la carte. Crisis? What crisis? (Realistically £125 to £150 a head after wine, sides and 15% service charge. Reservation cancelled.)

I see Coq d'argent have a set menu still but you have to book it via travel zoo.

[LuckyThirteen]

I'm going to bet this quarter and next will see us in technical recession.

Expect measures in Spring budget to bounce things leading up to election