BOE Governor fuels speculation of 2015 interest rate hike

worldtraveller

Bank of England governor Mark Carney last night dropped another strong hint that markets could be underestimating the likelihood of a 2015 interest rate hike.

“In the current circumstances there is no need to wait to raise rates because of a risk management approach and run the risk of inflation overshooting target......In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year,” he said.

The first move toward a rate hike could begin as early as next month.

CITY AM

IMHO, based on the current state of the overall global economy, as I'm seeing it, with the likes of serious issues building in China and the ongoing problems in Europe, I just don't see this happening this year. I see an overall slowing in the global economy over the second half of this year. Also, much will surely depend on the Federal Reserve as well, since Carney and they seem to be reading from the same prayer sheet now, significantly more than in the past.

Generali

FWIW, Morgan Stanley reckon the oil price falls will drop out of the inflation numbers towards the end of 2015, the first vote for a rise from an MPC member will come in August and the first rise will be Q1 2016.

wymondham

Didn't he do the same thing last year... and the year before?


Do you think Osborne will let him this time?

Generali

wymondham wrote: »

Didn't he do the same thing last year... and the year before?


Do you think Osborne will let him this time?

The biggest change I can see is that rate rises have changed from being 18 months away to being 6 months away. That 6 or 18 months is the tomorrow that never comes.

I have my doubts that Mr Osborne is dictating the base rate. Why would the BoE increase them when everyone else is either cutting or holding and CPI is at 0%?

padington

Generali wrote: »

FWIW, Morgan Stanley reckon the oil price falls will drop out of the inflation numbers towards the end of 2015, the first vote for a rise from an MPC member will come in August and the first rise will be Q1 2016.

Why wouldn't Irans oil coming online knock inflation down for a longer period than that ?

neilem

Does anyone actually believe him anymore? He always forecasts a rate rise in the not too distant future, then it never comes. I'd be very surprised if this time is any different, unfortunately I'm expecting excuses than a rate rise.

purch

I think there is a spin being placed on the comments which is not necessarily there.

The Gov is trying to ensure that any potential rate rise does not cause a shock to the economy, but he is not actually saying that a rise is any more likely in 6 months time tha nit was 6 months ago.

the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year

What he is saying, is that the decision as to whether to raise rates, or leave them alone will become clearer in 6 months, not that anything will actually need to be done.

The "sharper focus" he says will be apparent in the new year could quite easily be that the adjustment won't be required for a long time.

cells

What he suggested was that once they do increase rates he expects the new norm to be about half of the old norm of 4.5%

That would mean in the medium term (maybe 5 years from now) interest rates are going to be 2% or not much higher.

That is what I was thinking too.
Most 2.5% by 2020. A rate increase might be 0.25% a year

My guess is that we will go to 0.75% in a years time so Q3-2016