What is interest rate likely to rise to?

ashm1

The real 'bargain hunter' will be off to the US to shop now. BBC News gave a talk through exchange rates for interested consumers.

Anyone looking into Euro savings ?

Or maybe move into commodities ?

benood

Can't see rates over 6% in 2007. The recent rises will kick in for consumers in Q1 07 dampening demand and thence curbing inflation mid 07. The dollar's fall in the last month means oil prices, and any other prices denominated in USD or currencies pegged to it, have fallen further in sterling terms.

8% rates would certainly cause a recession but on my (back of envelope) analysis we needn't worry unduly.

free4440273

current rates, as they stand in the uk, will not be enough to stop the increase in house prices, the increase in mortgage debt, the inevitable rise in inflation - until we see this happening then rates justifiably need to keep on rising. it's the month on month rise in house prices and mortgage debt that is really worrying.

ManAtHome

benood wrote:

The recent rises will kick in for consumers in Q1 07 dampening demand and thence curbing inflation mid 07.

Yes, but won't it cut demand for the shiny stuff which is deflating (plasma screen, digital products etc). If it does (in theory..) the "basket of commodities" should surely be adjusted to reflect the lower proportion of spending on this type of stuff?

Always wondered myself how (or even if) credit is incorporated into any RPI/CPI calculations. If you look at overall consumption, the "essentials" will generally be paid in cash and a lot of the shiny stuff on credit. So if you look at a single years consumption, it's bound to be skewed by credit unless interest rates (total/deferred payback) are included?

cloud_dog

benood wrote:

The dollar's fall in the last month means oil prices, and any other prices denominated in USD or currencies pegged to it, have fallen further in sterling terms.

Ignoring supply & demand effects on prices, if the $ falls in value then the price (in $) of commodities, i.e. oil, gold, etc will rise to reflect their true value, ergo quid pro quo - and any other latin stuff I can think of :j

We main gain, slightly, if the £ pound is viewed as more of a safe haven instead of $ (together with C$, Euro, Yen, Yuan, etc).

cloud_dog

hot_chick_2

Real inflation has been on the rise for a while.:eek:

The Government disguises this with their figures, but the truth is coming out and interest rates will have to rise.

I would guess interest rates will go up to 6%+ and only come down when the house prices start to dive southwards all over the country.

Savings will also look more inviting if the rates are above 6% and the Buy to Let owners are making less than 5% from rental income and the property value is dropping. This is starting to happen in some areas now and will get worse in 2007.

Don't forget we are also looking at a debt time bomb built up with cheap borrowing. If interest rates did rise say another 1.5% then the whole lot could explode and lots of people would crash in a mountain of self made debt.

free4440273

hot_chick wrote:

Real inflation has been on the rise for a while.:eek:

The Government disguises this with their figures, but the truth is coming out and interest rates will have to rise.

I would guess interest rates will go up to 6%+ and only come down when the house prices start to dive southwards all over the country.

Savings will also look more inviting if the rates are above 6% and the Buy to Let owners are making less than 5% from rental income and the property value is dropping. This is starting to happen in some areas now and will get worse in 2007.

Don't forget we are also looking at a debt time bomb built up with cheap borrowing. If interest rates did rise say another 1.5% then the whole lot could explode and lots of people would crash in a mountain of self made debt.

agree absolutely with this post - just one proviso: as i have said in my previous posts i see rates heading towards between 7.5 to eight per cent during 2007.

meanmachine_2

hot_chick wrote:

Real inflation has been on the rise for a while.:eek:

Yes we know that, the Telegraph knows that (see yesterday's front page), but the BoE and the government will never admit that.

Otherwise they'll essentially be admitting that they've conned the electorate all of these years.

Then we'd start asking for compensation for being diddled out of salary increases, and the whole sham economy would collapse.

free4440273

base rates untouched: it's official - they really are stupid! have a nice weekend everybody.