Bank of England shocks markets with close vote on rate hike

worldtraveller

HAMISH_MCTAVISH wrote: »

For the two years prior to the Brexit vote wages were rising strongly in real terms at around 2% above inflation.

The Brexitary GBP devaluation has ended that of course...

Yes, that may well be true, if you wish to look solely at wages. However, when you look at the broader issues, pension funds for some have seen a massive growth in one year alone since Brexit, much of it based on the devaluation of GBP, particularly against USD.

As I'm sure you well know, the average automatic enrolment scheme automatically puts its members into a balanced fund with a mixture of equities and fixed interest assets. For funds with a 20-60% weighting to equities, the average return since Brexit has been around 10%, while those with a 40-85% weighting to equities, as I have, have seen average returns of around 13%. Personally I've managed to achieve over 20% return in my SIPP, the majority of it due to GBP devaluation. Thank you very much!

I totally accept that currency hedging is an issue, but, thanks to the falling value of sterling, those pension schemes that did not hedge their exposure to currency risk in their overseas holdings would have, naturally, done a lot better than those that did hedge.

Thrugelmir

worldtraveller wrote: »

Personally I've managed to achieve over 20% return in my SIPP, the majority of it due to GBP devaluation. Thank you very much!

When you decide to holiday abroad in retirement you'll find that your money doesn't go as far (if exchange rates were to remain static). Or your new BMW has increased in price. There's no such thing as free money.

If you liquidate your stocks where are you going to park the cash? Money on deposit earns nothing. Complacency is a dangerous risk.

worldtraveller

Thrugelmir wrote: »

When you decide to holiday abroad in retirement you'll find that your money doesn't go as far (if exchange rates were to remain static). Or your new BMW has increased in price. There's no such thing as free money.

If you liquidate your stocks where are you going to park the cash? Money on deposit earns nothing. Complacency is a dangerous risk.

When I retire who knows what the exchange rate will be? When I buy my next car I'll take all issues into consideration. I'll also decide on what I do with my SIPP, as I always have, on a moving basis, with all my pensions, over the past 20-25 years or so, based on the market situation at that time. That's the fun about doing it yourself. I don't believe I've ever been complacent, just happy with my own investment strategy and returns.

veryintrigued

Carney seems utterly clueless.

Thrugelmir

worldtraveller wrote: »

When I retire who knows what the exchange rate will be?

Will impact the value of your investments though. Just the idea that UK rates might rise. Caused the FTSE to drop .63% and the $ exchange rate to rise .86%. If the £ - $ returns to it's more normal trading area of $1.65. Then there's one heck of a shock in store for some people. Who are piling into the market for the free money.

I was buying emerging markets last year. Seen a good return. I've no idea what to do now though. Whether to hold or cash in. I'm not complacent either. Not expecting to retain all the gains made.

michaels

The BoE always seems to be fighting yesterday's battles.

Last year they went too soon with the post Brexit interest rate cut and probably over-stimulated the market. Now they are talking of raising rates when it looks like growth this year will definitely be closer to 1% than 2%, wage growth is low and falling, the housing market is moribund due to the transaction taxes and the inflation is a one off working through of the fall in the exchange rate rather than a process.

I guess if they do raise rates they will at least get to test whether the banks have enough capital set aside for adverse credit as the economy will tank even worse.

Sad thing is it is clearly not the fundamentals that have changed but the political winds, the bit of the Tory party in the ascendancy doesn't 'trust' the ZIRP and hark back to the days where sensible savers did not 'bail out' profligate borrowers through low interest rates. The MPC are political appointees and sway in the wind of political opinion.

michaels

Entirely off topic, whilst the 28% rise in my pension fund over the last year looks nice, as I am investing big this year and the next few I suspect it just means I am buying high

Thrugelmir

michaels wrote: »

Sad thing is it is clearly not the fundamentals that have changed but the political winds,

BOE remit is financial stability. View is that lenders have not learnt lessons of the past. Lending is model based rather than judgement. In this context mortgage lending is one aspect. Shoring up capital requirements forces lenders to raise lending rates. Marginally not significantly. Secondly consumer debt levels are a concern. As debt levels continue to rise. Increase is in double digits well above wage rises.

BOE's action hits consumer markets only. Not the cost of borrowing to the Government. Which a base rate rise would.

As the other remit of BOE is to control inflation. That's when base will be raised.

teddysmum

Graham_Devon wrote: »

Just 8 days later, Carney hints at rate rises...

http://www.bbc.co.uk/news/business-40427865

He can always get a job writing articles for the Daily Mail. They contradict their announcements on health issues every few weeks, or even days. (statins good/bad, butter/spread etc).

Thrugelmir

ilovehouses wrote: »

Have we just seen the £:$ exchange rate which the BoE consider a floor?

£1:$1.27. Worse than that and they see themselves writing letters of apology to No. 11 when inflation's too high?

BOE's remit isn't to control exchange rates.