Fed Hike

economic

michaels wrote: »

Obvious solution is to increase German interest rates, the German economy (possibly apart from it's banks) could almost certainly cope with higher rates and a stronger German currency would help to normalise world trade

i much stronger EUR will completely destroy an already very weak EZ. and higher rates may actually help ou tthe banks through net interest margin.

i suggest you understand the basics of economics/finance first before posting this garbage.

Generali

http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

Incomes and spending both up heavily in the US. More pointing to another increase in the Fed Funds rate.

michaels

Do people see brexit or remain as being more positive for UK rates.

Those supporting remain seem to argue that current weak growth is due to the referendum uncertainty suggesting a return to more robust growth supporting rate increases once the vote is won.

They also suggest that a leave vote will lead not only to economic weakness but also a currency collapse to the extent that interest rates need to be increased to reduce imported inflation.

I am not sure I buy either arguement - I don't see UK weakness as being about uncertainty but actually relating to weka world and European growth. Neither given past experience do I see the BoE raising rates to tackle imported inflation with a weak economy - remeber a couple of years ago when inflation hit 5% and rates didn't budge from 0.5%. Generally lower real interest rates are just what the doctor ordered for a stagnant economy. Don't forget that the fall in inflation in that period from 5% to effectively zero is equivalent to an increase in real rates of 5%.

worldtraveller

michaels wrote: »

Do people see brexit or remain as being more positive for UK rates.

Those supporting remain seem to argue that current weak growth is due to the referendum uncertainty suggesting a return to more robust growth supporting rate increases once the vote is won.

They also suggest that a leave vote will lead not only to economic weakness but also a currency collapse to the extent that interest rates need to be increased to reduce imported inflation.

I am not sure I buy either arguement - I don't see UK weakness as being about uncertainty but actually relating to weka world and European growth. Neither given past experience do I see the BoE raising rates to tackle imported inflation with a weak economy - remeber a couple of years ago when inflation hit 5% and rates didn't budge from 0.5%. Generally lower real interest rates are just what the doctor ordered for a stagnant economy. Don't forget that the fall in inflation in that period from 5% to effectively zero is equivalent to an increase in real rates of 5%.

I agree with you that, IMHO, UK weakness is nothing, or very little indeed, to do with uncertainty over a possible leave vote. As you say, it's much more to do with a generally weaker global economy, which I've seen in all markets since Q3 last year.

Likewise I still don't see the Fed raising rates before, at the earliest, the end of this year and I certainly don't see the UK doing so until well into 2017, again, at the earliest.

Generali

I guess it depends which rates you mean. I would guess that the spread over base rates would increase for floating rate borrowers on a Brexit vote. Whether that spread would contract again depends on what happens post Brexit which to my mind rather sums up the Brexit problem.

There is a good chance that the BoE would reduce base rates in an attempt to keep market rates at the same level.

I suspect that the missing link is going to be the FX market reaction to a Brexit vote. The UK is a big net importer and simply can't afford for the Quid to collapse. A post-ERM fall (15%?) would be okay. Substantially more (25%?) would mean the BoE would feel compelled to act I think. Remember that more than half of the food eaten in the UK is grown abroad so a big drop in the Quid is very regressive and potentially destabilising.

A Brexit vote would also probably be negative for the Euro in the short term so the food thing might work itself out.

FWIW, our Chief Economist thinks that Brexiteers are fricking stupid. (He didn't say fricking).

michaels

Generali wrote: »

I guess it depends which rates you mean. I would guess that the spread over base rates would increase for floating rate borrowers on a Brexit vote. Whether that spread would contract again depends on what happens post Brexit which to my mind rather sums up the Brexit problem.

There is a good chance that the BoE would reduce base rates in an attempt to keep market rates at the same level.

I suspect that the missing link is going to be the FX market reaction to a Brexit vote. The UK is a big net importer and simply can't afford for the Quid to collapse. A post-ERM fall (15%?) would be okay. Substantially more (25%?) would mean the BoE would feel compelled to act I think. Remember that more than half of the food eaten in the UK is grown abroad so a big drop in the Quid is very regressive and potentially destabilising.

A Brexit vote would also probably be negative for the Euro in the short term so the food thing might work itself out.

FWIW, our Chief Economist thinks that Brexiteers are fricking stupid. (He didn't say fricking).

I guess he won't be looking at my CV then

Conrad

michaels wrote: »

Do people see brexit or remain as being more positive for UK rates.

.

I took a fair bit of stick after the crash for arguing on here that Britain is a safe haven and investors would flock here, which turned out to be the case.


If we leave, our safe haven status will be underlined still further.


I've only recently realised just how precarious the EU is economically. Look at Italian Banks and loan delinquency or their 37% youth unemployment - the risks in the EU are monumental.


I reckon if we remain in, we're going to be coughing up an awful lot more money.

Conrad

Generali wrote: »

Remember that more than half of the food eaten in the UK is grown abroad so a big drop in the Quid is very regressive and potentially destabilising.

A Brexit vote would also probably be negative for the Euro in the short term so the food thing might work itself out.

We could import cheaper foods when outside the EU price enhancing customs union.


Cheaper pound means more exports, less imports, just what we need.


Cant see pound falling anyway, as I kept on saying after the last crash our safe haven investor status if anything will be enhanced not diminished as an independent fleet of foot locally tailored nation.


Dollar might fall given $20 trillion debt bomb.


Your Chief Economist saying we're mad to exit, well, you must know economists are renowned for herd think, as has been shown over and over again through history so it comes as no surprise he's continuing the tradition. Amazing the UK is the USA's largest investor partner and vice-versa, no trade deal required. Amazing S Korea, Japan and so many others export masses into the EU 'without having a seat at the rules table'. Trade rules are largely;y set globally now anyway

Filo25

Conrad wrote: »

We could import cheaper foods when outside the EU price enhancing customs union.


Cheaper pound means more exports, less imports, just what we need.


Cant see pound falling anyway, as I kept on saying after the last crash our safe haven investor status if anything will be enhanced not diminished as an independent fleet of foot locally tailored nation.


Dollar might fall given $20 trillion debt bomb.


Your Chief Economist saying we're mad to exit, well, you must know economists are renowned for herd think, as has been shown over and over again through history so it comes as no surprise he's continuing the tradition. Amazing the UK is the USA's largest investor partner and vice-versa, no trade deal required. Amazing S Korea, Japan and so many others export masses into the EU 'without having a seat at the rules table'. Trade rules are largely;y set globally now anyway

Never mind falling on Brexit, the Pound falls when you get a strong Brexit poll out at the moment!

Conrad

Filo25 wrote: »

Never mind falling on Brexit, the Pound falls when you get a strong Brexit poll out at the moment!

Another killer point you got there, lol.......


In other news cats get stuck up trees