BOE 3rd November Rate Announcement
Discussion
Michael_B said:
The nutters will win because the educated and reasonable candidates are perceived to be out of touch?
So what price (or indeed worth) education and reason?
Can you name a educated/reasonable candidate that has not led us into this current financial situation?So what price (or indeed worth) education and reason?
Musings of interest rates hitting 8% in the USA: https://www.bbc.co.uk/news/business-68769561
If your mortgage is coming up for renewal, and it's starting with a 5.x%, you should probably snap their hand off.
If your mortgage is coming up for renewal, and it's starting with a 5.x%, you should probably snap their hand off.
Fed minutes from the last FOMC (March) were released an hour ago,
They spoke of QT taper possibly starting in June.
Also minutes stated "almost all saw it appropriate to cut this year".
The March FOMC was before lat Friday;s payroll data & todays "sticky" CPI print, despite the framing of Mr Dimon's rate discussion, the market is still looking for 2 rate cuts this year, whcih is currently down from the most optimistic 3 cuts a few weeks ago.
They spoke of QT taper possibly starting in June.
Also minutes stated "almost all saw it appropriate to cut this year".
The March FOMC was before lat Friday;s payroll data & todays "sticky" CPI print, despite the framing of Mr Dimon's rate discussion, the market is still looking for 2 rate cuts this year, whcih is currently down from the most optimistic 3 cuts a few weeks ago.
https://youtu.be/h9clL36dnPU?si=MxfFMuwZamWk5le_
Multiple points raised on PH over the last 24 months.
Multiple points raised on PH over the last 24 months.
DonkeyApple said:
https://youtu.be/h9clL36dnPU?si=MxfFMuwZamWk5le_
Multiple points raised on PH over the last 24 months.
I really dislike that guyMultiple points raised on PH over the last 24 months.
Puzzles said:
DonkeyApple said:
https://youtu.be/h9clL36dnPU?si=MxfFMuwZamWk5le_
Multiple points raised on PH over the last 24 months.
I really dislike that guyMultiple points raised on PH over the last 24 months.
Why is petrol remaining so high at the pump when the cost of oil is below the OPeC floor and the cost of refining has plummeted? Have we really not paid back the utilities for the brief period of extremely high raw material costs post Covid and now TFF and U.K. gas are pricing all the way back down and arguably below the 25 year norm and have been for a long time now? Why is renewable energy still able to be sold at the most expensive fossil fuel generation price at point of sale when renewables have long since stopped being a niche supply? Why have cars almost overnight become so much more expensive to repair yet underwriting syndicates are having some of the best times since the 80s?
And right at the outside of the rate rises the question was why would raising rates in the 2020s have the same impact as it did in the 1980s when the way consumers interact with credit is so manifestly different?
He raises a series of points that merit consideration but where there is a significant risk of falling in to some Commie, CND, whinging hole if not extremely careful. As a capitalist, one should still focus on where the money is going as you want it to flow to yourself rather than others if possible.
I think there is an argument that raising consumer prices and raising salaries has been another bail out fudge like the others that not just maintains what has become an excessive divide but risks driving it yet further.
Other than the need to track the FED to protect the GBP I'm honestly still not understanding why interest rates are seen as a relevant tool domestically to curb or enhance activity when in the 21st century we can do this highly targeted using lending criteria.
I also do not understand why corporate entities such as Thames Water aren't killed. We're not some Commie state, TW is a company that asset stripped itself, loaded up with too much debt and now must be put i to insolvency so that new equity can be issued to new investors who will run it profitably. Why not go so far as to make an example of it and publicly tell its equity holders and debt holders they must make way for better, smarter, superior equity and debt holders? TW is a failure. Kill it.
So what is the current thinking with regards to interest rate cuts this year? The main reason I am asking is I have mortgage due to renew at the start of October so would like a heads up!
It seems to me that the interest rate rises are finally starting to have some effect (The brick on a piece of elastic theory) but it is far too early to start reducing interest rates again as inflation is still high.
Whenever I go everywhere is rammed and people are spending money like there is no tomorrow so I actually wonder what real effect these interest rises are having on a lot of people.
Will be get a 0.25% or 0.5% 'feel good' bribe from the government before the next election?
My gut feel is a test the waters 0.25% cut in the summer to see what happens.
It seems to me that the interest rate rises are finally starting to have some effect (The brick on a piece of elastic theory) but it is far too early to start reducing interest rates again as inflation is still high.
Whenever I go everywhere is rammed and people are spending money like there is no tomorrow so I actually wonder what real effect these interest rises are having on a lot of people.
Will be get a 0.25% or 0.5% 'feel good' bribe from the government before the next election?
My gut feel is a test the waters 0.25% cut in the summer to see what happens.
ThingsBehindTheSun said:
So what is the current thinking with regards to interest rate cuts this year? The main reason I am asking is I have mortgage due to renew at the start of October so would like a heads up!
It seems to me that the interest rate rises are finally starting to have some effect (The brick on a piece of elastic theory) but it is far too early to start reducing interest rates again as inflation is still high.
Whenever I go everywhere is rammed and people are spending money like there is no tomorrow so I actually wonder what real effect these interest rises are having on a lot of people.
Will be get a 0.25% or 0.5% 'feel good' bribe from the government before the next election?
My gut feel is a test the waters 0.25% cut in the summer to see what happens.
You can see what the market thinks just from current mortgage rates. These went 100bps below base when the market thought there would be cuts greater than that over the loan period but that gap has closed considerably now. It seems to me that the interest rate rises are finally starting to have some effect (The brick on a piece of elastic theory) but it is far too early to start reducing interest rates again as inflation is still high.
Whenever I go everywhere is rammed and people are spending money like there is no tomorrow so I actually wonder what real effect these interest rises are having on a lot of people.
Will be get a 0.25% or 0.5% 'feel good' bribe from the government before the next election?
My gut feel is a test the waters 0.25% cut in the summer to see what happens.
12 month swap looks to be around 4.8 so market consensus is for around 50bps this year maybe?
DonkeyApple said:
You can see what the market thinks just from current mortgage rates. These went 100bps below base when the market thought there would be cuts greater than that over the loan period but that gap has closed considerably now.
12 month swap looks to be around 4.8 so market consensus is for around 50bps this year maybe?
On my current BTL mortgage I am being offered with no product fee12 month swap looks to be around 4.8 so market consensus is for around 50bps this year maybe?
2 year 5.65%
3 year 5.55%
5 year 5.03%
Do I take the 2/3 year and hope interest rates fall by a decent margin, or go 5 years, save money in years 2/3 compared to the 2/3 year fixed and potentially regret this in years 4 and 5 if rates fall by a big margin?
I guess it all depends if you believe rates with start with a 1 or 2 in 2 or 3 years time. Personally I am not sure they will.
DonkeyApple said:
I also do not understand why corporate entities such as Thames Water aren't killed. We're not some Commie state, TW is a company that asset stripped itself, loaded up with too much debt and now must be put i to insolvency so that new equity can be issued to new investors who will run it profitably. Why not go so far as to make an example of it and publicly tell its equity holders and debt holders they must make way for better, smarter, superior equity and debt holders? TW is a failure. Kill it.
Is it all part of the plate spinning, the avoidance of doing something that could be that last straw, or butterfly wing flap initiation? It feels like everything large with possible systemic (even 'just' a negative sentiment) effect is 'managed'?
There doesn't seem a willingness to do the right thing as the immediate consequences will be bad? We have those bank deposit protection schemes but in the US ($250K protected) the SVB collapse apparently saw 90% of depositors over this and what happened, all were made good/protected...........for the greater good presumably.
So is it the wealthy protecting themselves, the fear of an event like this causing a bigger ripple effect leading to a potential 2008 type crisis or is it the knowledge this is 99% what will happen.
It almost feels like a global game of "whack-a-mole" is going on.
DonkeyApple said:
Other than the need to track the FED to protect the GBP I'm honestly still not understanding why interest rates are seen as a relevant tool domestically to curb or enhance activity when in the 21st century we can do this highly targeted using lending criteria.
I also do not understand why corporate entities such as Thames Water aren't killed. We're not some Commie state, TW is a company that asset stripped itself, loaded up with too much debt and now must be put i to insolvency so that new equity can be issued to new investors who will run it profitably. Why not go so far as to make an example of it and publicly tell its equity holders and debt holders they must make way for better, smarter, superior equity and debt holders? TW is a failure. Kill it.
TW, agree.I also do not understand why corporate entities such as Thames Water aren't killed. We're not some Commie state, TW is a company that asset stripped itself, loaded up with too much debt and now must be put i to insolvency so that new equity can be issued to new investors who will run it profitably. Why not go so far as to make an example of it and publicly tell its equity holders and debt holders they must make way for better, smarter, superior equity and debt holders? TW is a failure. Kill it.
Any social intervention should be in the social interest.
Let the whole lot go to the wall and have a public trust (ideally in interests of the region it serves) take it over.
On your former point wrt credit. Is that using subsidies to encourage cheaper than market rate borrowing?
Or are you suggesting market rate is modified by adding a premium for stuff you want to curtail which then subsidises stuff you want to encourage?
What kind of ranges do you suggest?
Ie, if 10yr debt is 5%, do you add 1% and subtract 1%? Ie, 4-6% range.
What if that isn’t enough? How do you fund enough encouragement?
As much as BR is set by BofE, if they don’t set it near cost of borrowing via debt markets surely government end up unable to raise debt too?
Ie, who’d buy treasuries when they can get say 1% more in a bank account?
ThingsBehindTheSun said:
On my current BTL mortgage I am being offered with no product fee
2 year 5.65%
3 year 5.55%
5 year 5.03%
Do I take the 2/3 year and hope interest rates fall by a decent margin, or go 5 years, save money in years 2/3 compared to the 2/3 year fixed and potentially regret this in years 4 and 5 if rates fall by a big margin?
I guess it all depends if you believe rates with start with a 1 or 2 in 2 or 3 years time. Personally I am not sure they will.
Given were inflation is likely to be and it looks to be a bit sticky, neutral BoE rate will be in the 3.5-4.5% range over the next few years (says theory). Of course, that doesn't account for any black swan events - but it would be very difficult to see rates dropping that low.2 year 5.65%
3 year 5.55%
5 year 5.03%
Do I take the 2/3 year and hope interest rates fall by a decent margin, or go 5 years, save money in years 2/3 compared to the 2/3 year fixed and potentially regret this in years 4 and 5 if rates fall by a big margin?
I guess it all depends if you believe rates with start with a 1 or 2 in 2 or 3 years time. Personally I am not sure they will.
ECB is just out, held at 4% but its all but a given they are going to cut in - most likely in June. The language is being adjusted - "the key ECB interest rates are at levels that are making a substantial contribution to the ongoing disinflation process. " This drops the "if maintained for a sufficiently long duration"
Edited by OoopsVoss on Thursday 11th April 17:06
Bear in mind that UK is said to be more vulnerable to ongoing inflation than many other economies and it would take a leap of faith right now to believe UK rates will drop significantly anytime soon. BoE continues to follow its approach of, "Here's some inflation so let's increase everybody's costs by hiking interest rates. Oh dear, those increased costs are making everyone try to increase prices to cover their increased costs and inflation doesn't seem to be going away. Let's have higher rates for longer because more of the same medicine is bound to work."
Increasing taxes, flat-lining economy, public services crumbling. Welcome to UK 2024.
UK has exactly the same approach in its criminal justice system. "We need to create more crimes and longer sentences to deter criminals. Oh dear, the prisons are full - we'll let criminals out early to relieve pressure on the system. Never mind that the probation service is already out of its depth; more of the same is bound to make things better".
Increasing taxes, flat-lining economy, public services crumbling. Welcome to UK 2024.
UK has exactly the same approach in its criminal justice system. "We need to create more crimes and longer sentences to deter criminals. Oh dear, the prisons are full - we'll let criminals out early to relieve pressure on the system. Never mind that the probation service is already out of its depth; more of the same is bound to make things better".
Panamax said:
Bear in mind that UK is said to be more vulnerable to ongoing inflation than many other economies and it would take a leap of faith right now to believe UK rates will drop significantly anytime soon. BoE continues to follow its approach of, "Here's some inflation so let's increase everybody's costs by hiking interest rates. Oh dear, those increased costs are making everyone try to increase prices to cover their increased costs and inflation doesn't seem to be going away. Let's have higher rates for longer because more of the same medicine is bound to work."
Increasing taxes, flat-lining economy, public services crumbling. Welcome to UK 2024.
UK has exactly the same approach in its criminal justice system. "We need to create more crimes and longer sentences to deter criminals. Oh dear, the prisons are full - we'll let criminals out early to relieve pressure on the system. Never mind that the probation service is already out of its depth; more of the same is bound to make things better".
This again?Increasing taxes, flat-lining economy, public services crumbling. Welcome to UK 2024.
UK has exactly the same approach in its criminal justice system. "We need to create more crimes and longer sentences to deter criminals. Oh dear, the prisons are full - we'll let criminals out early to relieve pressure on the system. Never mind that the probation service is already out of its depth; more of the same is bound to make things better".
Tightening cycles almost always end in a recession and inflation is quickly curtailed.
The recession just hasn’t happened yet.
People aren’t getting sufficient pay rises to cover their costs. Thus economic contraction.
A few people are getting pay rises, and maybe they’re celebrating now, but it’s only a matter of time.
I recall 03-08 getting solid pay rises year on year, then it was sub 1% post 09.
Just everyone is so terribly excited for rates to fall and front-running it, along with the foolish ‘soft landing’ concept that’s rarer than a black swan event… that they’re in effect stimulating against the CBs tightening efforts… which is dragging this out.
If you want someone to ultimately blame, blame the idiots buying risk like there is no tomorrow in the belief they’re gonna go to the moon!!!11!1!! and all pay off their mortgages or buy a Lambo or whatever.
ThingsBehindTheSun said:
So what is the current thinking with regards to interest rate cuts this year? The main reason I am asking is I have mortgage due to renew at the start of October so would like a heads up!
It seems to me that the interest rate rises are finally starting to have some effect (The brick on a piece of elastic theory) but it is far too early to start reducing interest rates again as inflation is still high.
Whenever I go everywhere is rammed and people are spending money like there is no tomorrow so I actually wonder what real effect these interest rises are having on a lot of people.
Will be get a 0.25% or 0.5% 'feel good' bribe from the government before the next election?
My gut feel is a test the waters 0.25% cut in the summer to see what happens.
No impact if they are on fixed rate mortgages. It is definitely quieter out there imho + based in the SE we are insulated from a lot of it as people are generally "wealthy" compared to other parts of the country.It seems to me that the interest rate rises are finally starting to have some effect (The brick on a piece of elastic theory) but it is far too early to start reducing interest rates again as inflation is still high.
Whenever I go everywhere is rammed and people are spending money like there is no tomorrow so I actually wonder what real effect these interest rises are having on a lot of people.
Will be get a 0.25% or 0.5% 'feel good' bribe from the government before the next election?
My gut feel is a test the waters 0.25% cut in the summer to see what happens.
TX.
Panamax said:
Bear in mind that UK is said to be more vulnerable to ongoing inflation than many other economies and it would take a leap of faith right now to believe UK rates will drop significantly anytime soon. BoE continues to follow its approach of, "Here's some inflation so let's increase everybody's costs by hiking interest rates. Oh dear, those increased costs are making everyone try to increase prices to cover their increased costs and inflation doesn't seem to be going away. Let's have higher rates for longer because more of the same medicine is bound to work."
Increasing taxes, flat-lining economy, public services crumbling. Welcome to UK 2024.
UK has exactly the same approach in its criminal justice system. "We need to create more crimes and longer sentences to deter criminals. Oh dear, the prisons are full - we'll let criminals out early to relieve pressure on the system. Never mind that the probation service is already out of its depth; more of the same is bound to make things better".
Well said. Good video above too, shows what the true value of inflation is to people and where it really is.Increasing taxes, flat-lining economy, public services crumbling. Welcome to UK 2024.
UK has exactly the same approach in its criminal justice system. "We need to create more crimes and longer sentences to deter criminals. Oh dear, the prisons are full - we'll let criminals out early to relieve pressure on the system. Never mind that the probation service is already out of its depth; more of the same is bound to make things better".
Inflation chatter is masking a massive problem in that although profits seem to be up, productivity is down, prices are high and still rising. I see it as a death spiral of no return.
jameswills said:
Well said. Good video above too, shows what the true value of inflation is to people and where it really is.
Inflation chatter is masking a massive problem in that although profits seem to be up, productivity is down, prices are high and still rising. I see it as a death spiral of no return.
The problem is complex, but one of things that hobbles CBs is fear. Rate setting isn't the only lever they have to pull, they can also throttle credit supply through QE/QT. The reason they lean so heavily on rates is:Inflation chatter is masking a massive problem in that although profits seem to be up, productivity is down, prices are high and still rising. I see it as a death spiral of no return.
1) no one ever tested the amount of QT required to remove excess leverage (it would likely blow up banks if they pulled it fast)
2) they are in a hall of mirrors. They simply are not allowed to spook the market. Politicians are dangerous enough, Truss, Trump etc; but if the CB looks out of the market step / running odd theory; you have a massive problem. Theory will dictate their response and they will NOT do radical policy (like cutting rates in to an inflationary spiral thats been advocated in here). The downside risks of that are far, far greater than the s
t show we are currently in. Its very likely that are a lot of companies are technically zombies, surviving on cheap debt. There may be a lot bigger an issue than a CRE bubble.The fact for most Central Banks, they really want to be doing as little as possible in the economy; so neither expansive or contraction of money supply.
Mr Whippy said:
TW, agree.
Any social intervention should be in the social interest.
Let the whole lot go to the wall and have a public trust (ideally in interests of the region it serves) take it over.
On your former point wrt credit. Is that using subsidies to encourage cheaper than market rate borrowing?
Or are you suggesting market rate is modified by adding a premium for stuff you want to curtail which then subsidises stuff you want to encourage?
What kind of ranges do you suggest?
Ie, if 10yr debt is 5%, do you add 1% and subtract 1%? Ie, 4-6% range.
What if that isn’t enough? How do you fund enough encouragement?
As much as BR is set by BofE, if they don’t set it near cost of borrowing via debt markets surely government end up unable to raise debt too?
Ie, who’d buy treasuries when they can get say 1% more in a bank account?
Re lending, you simply tighten the criteria too down or losses for stimulus. Need to inject stimulus into housing you just increase how much can be borrowed at the top, want to curb it you reduce how much can be borrowed at the top. It's remarkably simple. Want to steer capital out of the car market to go into other markets you just limit how much can be secured against a car, want more money to flow in you allow more to be borrowed. Doesn't even need to touch consumers lower down unless you want to curb highstreet spending and then you just haul in what pay in 3 and zero deals can cover. Want everyone on the breadline to go on a shopping spree you deregulate those service further, although I'm not sure that's possible consider just how unrestricted they already are. Any social intervention should be in the social interest.
Let the whole lot go to the wall and have a public trust (ideally in interests of the region it serves) take it over.
On your former point wrt credit. Is that using subsidies to encourage cheaper than market rate borrowing?
Or are you suggesting market rate is modified by adding a premium for stuff you want to curtail which then subsidises stuff you want to encourage?
What kind of ranges do you suggest?
Ie, if 10yr debt is 5%, do you add 1% and subtract 1%? Ie, 4-6% range.
What if that isn’t enough? How do you fund enough encouragement?
As much as BR is set by BofE, if they don’t set it near cost of borrowing via debt markets surely government end up unable to raise debt too?
Ie, who’d buy treasuries when they can get say 1% more in a bank account?
DonkeyApple said:
Re lending, you simply tighten the criteria too down or losses for stimulus. Need to inject stimulus into housing you just increase how much can be borrowed at the top, want to curb it you reduce how much can be borrowed at the top. It's remarkably simple. Want to steer capital out of the car market to go into other markets you just limit how much can be secured against a car, want more money to flow in you allow more to be borrowed. Doesn't even need to touch consumers lower down unless you want to curb highstreet spending and then you just haul in what pay in 3 and zero deals can cover. Want everyone on the breadline to go on a shopping spree you deregulate those service further, although I'm not sure that's possible consider just how unrestricted they already are.
Genuine question, is that in the BoEs mandate? Or is it FCA? Agree its a sound idea, but it feels a bit like it goes against self regulation (which might / probably have failed).I'm very much of the view it's control credit supply - not rate setting that is the correct approach, but not sure regulatory thinking is sufficiently joined up and its very easy to hide behind "mandate". Aggressive QT, dramatically restricts credit supply, about the only (major) CB actively pursuing that IS the BoE. The Fed and ECB have chickened out on that one.
Post crisis response was paradoxical, curtail or tax banking resources BUT concurrent massive expansionary monetary policy (although the cynics might say the regs thrust was to make the banks support public sector debt balloon for bailout retribution - not sound risk reduction).
Maybe...
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