MSE News: Base Rate held at 0.5% once again

chucky

mewbie wrote: »

I suspect some of you operate on the principle that whatever I say it must be wrong.

not to make you feel unwanted ot anything but to be fair you don't really say very much apart from try to tell jokes, copy and paste the same bits about unemployment, debt levels and BTLers.

i can't see there would be much to pick you up on really.

as for Graham he's a legend - he does get things comepletly back to front on a regular basis. i enjoy his posts :T

Really2

mewbie wrote: »

I suspect some of you operate on the principle that whatever I say it must be wrong.

no mate, I really do believe we are in for a long period of very low growth. nothing personal old chap just my own belief on what I can see.

world wide consumption will be weak not just our own, to me that will keep down inflation add that to the sluggish growth and that will = low base rate.

I think the only thing that could change my outlook is something unforeseen like the government changing the inflation target or something that really upsets the markets (again).

Thrugelmir

Really2 wrote: »

world wide consumption will be weak not just our own, to me that will keep down inflation add that to the sluggish growth and that will = low base rate.

There's a great danger that people will equate low base rate to low lending interest rates. In the same way that LIBOR got bandied around in recent months. Its dropped off the radar, as overnight LIBOR is more or less in line with BOE base. So indicates that banks are lending to each other overnight, the liquidity injected by QE is working.

Commercial lending rates will be based on far more factors than BOE base. People that are expecting cheap mortgage rates ( other than the most attractive borrowers to lenders) are in for a shock. So speculating with borrowed money to make money won't be so easy.

mewbie_2

Energy bills
http://news.bbc.co.uk/1/hi/business/8297882.stm

Factory gate prices
http://news.bbc.co.uk/1/hi/business/8298549.stm

Bernanke wants to tighten
http://news.bbc.co.uk/1/hi/business/8298252.stm

and CPI is about 1.6%, only just under the target.

So much as I'd like a new world of low interest rates, at least while I have a mortgage and own bonds, I'm not sure that it can stay like this.

Really2

mewbie wrote: »

Energy bills
http://news.bbc.co.uk/1/hi/business/8297882.stm

Factory gate prices
http://news.bbc.co.uk/1/hi/business/8298549.stm

Bernanke wants to tighten
http://news.bbc.co.uk/1/hi/business/8298252.stm

and CPI is about 1.6%, only just under the target.

So much as I'd like a new world of low interest rates, at least while I have a mortgage and own bonds, I'm not sure that it can stay like this.

I would hope a lot of factory gate is export.

I agree with Bernanke as well they should go up when the economy recovers. That is kind of my point on low rates I do not think the economy will be strong enough for a reasonable time to justify higher rates.

Thrugelmir

Really2 wrote: »

I agree with Bernanke as well they should go up when the economy recovers. That is kind of my point on low rates I do not think the economy will be strong enough for a reasonable time to justify higher rates.

The G20 may well act in concert to maintain orderly exchange markets. The UK may well have little option if say the US was to increase rates to protect the pound.

There is also the matter of the amount of Gilts that will need to sold internationally to fund the budget deficit. What price will investors demand? We may yet see a downgrading of UK debt if the action to reduce the deficit isn't considered enough.

We aren't in control of our destiny. When Japan hit the buffers. Domestic savers bought up vast quantities of Government debt. The UK is not in the same position.

Really2

Thrugelmir wrote: »

The G20 may well act in concert to maintain orderly exchange markets. The UK may well have little option if say the US was to increase rates to protect the pound.

There is also the matter of the amount of Gilts that will need to sold internationally to fund the budget deficit. What price will investors demand? We may yet see a downgrading of UK debt if the action to reduce the deficit isn't considered enough.

We aren't in control of our destiny. When Japan hit the buffers. Domestic savers bought up vast quantities of Government debt. The UK is not in the same position.

"We, If, May" She works in my local Chinese takeaway.:)

I understand what you are saying but you can only go on what's in front of you.

I can plan for an asteroid strike but until some one states we are going to get hit in the near future or I see one in the sky that keeps getting bigger I am not going to stress unduly about one.

I am not really all that VI as I could move to fixed if I thought rates would be shooting up. I really do not think they will be.

inspector_monkfish

:rotfl:

Thrugelmir wrote: »

There's a great danger that people will equate low base rate to low lending interest rates. In the same way that LIBOR got bandied around in recent months. Its dropped off the radar, as overnight LIBOR is more or less in line with BOE base. So indicates that banks are lending to each other overnight, the liquidity injected by QE is working.

Commercial lending rates will be based on far more factors than BOE base. People that are expecting cheap mortgage rates ( other than the most attractive borrowers to lenders) are in for a shock. So speculating with borrowed money to make money won't be so easy.

Banks are still NOT lending to each other , not even overnight FYI

i am currently sitting on 2 billion quid that i aint gonna give to any other pesky bank, because the BOE will pay me 0.50%

best i'll get interbank will be 0.43%, and even then i wont be able to get rid of the whole lot...

and most of that 2 billion quid, i have only paid around 0.40% for from corporate lenders

so even though the banks are still not willing to lend, there are plenty of institutions that are still happy to lend to the banks...

Thrugelmir

Really2 wrote: »

I understand what you are saying but you can only go on what's in front of you.

Its a question of the size of the pot holes that need circumnavigating. The issues are known to out there in the road ahead.

Thrugelmir

inspector_monkfish wrote: »

:rotfl:

Banks are still NOT lending to each other , not even overnight FYI

i am currently sitting on 2 billion quid that i aint gonna give to any other pesky bank, because the BOE will pay me 0.50%

best i'll get interbank will be 0.43%, and even then i wont be able to get rid of the whole lot...

Banks primarily only need to borrow overnight to balance their books for regulatory liquidity requirements.

If interbank is low then QE has returned liquidity to the markets as banks don't need the funds.

You know how LIBOR is set don't you :rolleyes: