Bank of England rates could rise more than thought

Crashy_Time

Thrugelmir wrote: »

Polticians no longer control interest rates the MPC does. :cool:

The market eventually will take control back....


https://uk.reuters.com/article/eurozone-bonds/update-2-euro-zone-bond-yields-rise-after-us-10-year-yield-hits-3-pct-idUKL8N1S15QF

GreatApe

Crashy_Time wrote: »

The market eventually will take control back....

Only it might take longer than the term of a mortgage to do so.........

When was it that the famous financial planner sold to rent 2004 in London?
14 years later with the market at 3x the price he is still proclaiming the market will eventually take control back.

Renting waiting for a hpc is foolish
6% rent vs 2% mortgage.
Over a five year term you need a 20% crash just to break even
As I have been saying since 2011 low interest rates made waiting for a crash stupid it killed the bears. The same is true today.

Filo25

GDP growth only 0.1% in Q1, not sure how much more data there is ahead of the next rate decision, but it probably looks a bit more in the balance than it did a few months ago

michaels

Yep, that nailed on rise in May looks dead and buried now.

Thrugelmir

Filo25 wrote: »

GDP growth only 0.1% in Q1, not sure how much more data there is ahead of the next rate decision, but it probably looks a bit more in the balance than it did a few months ago

BOE is looking ahead and steering the economy on forecast future events not current. The low GDP rise is easily explainable by a number of factors. Doesn't change the general direction of travel.

Filo25

Thrugelmir wrote: »

BOE is looking ahead and steering the economy on forecast future events not current. The low GDP rise is easily explainable by a number of factors. Doesn't change the general direction of travel.

Eurozone forward looking indicators look soft and UK inflation came in lower than expected as well, wage inflation is the only factor you could probably use to justify a rate rise, but even then those upward wage pressures may drop out if UK inflation continues to fall back.

I'm not saying there won't be a rise in May but it looked nailed on a couple of months ago, it doesn't now, if we do get a May rise I wouldn't be surprised at all if that was the only one this year.

westernpromise

I think you have to ask what problem a May rate rise would head off. I'm not seeing one.

Thrugelmir

westernpromise wrote: »

I think you have to ask what problem a May rate rise would head off. I'm not seeing one.

Why would you see a problem. You don't have the resources the BOE has at it's disposal. The BOE employs around 4,000 people. Not a one man and his dog operation. Who sit round and have a chat once a month. BOE makes changes to influence the future, i.e. smooth out the bumps.

GreatApe

Thrugelmir wrote: »

Why would you see a problem. You don't have the resources the BOE has at it's disposal. The BOE employs around 4,000 people. Not a one man and his dog operation. Who sit round and have a chat once a month. BOE makes changes to influence the future, i.e. smooth out the bumps.

Economics is not a science this is obvious so employing more people doesn't necessarily get you closer to the truth

I have yet to invest the proper time but I like the theory that the base rate drives inflation in developed countries that use credit (as oppose to notes or tokens) seems to be workable.

That is to say if the central bank puts up interest rates to 10% the economy adjusts to produce roughly 10% inflation. If the central bank puts interest rates to 1% then the economy adjusts to produce roughly 1% inflation. In both instances keeping real rates somewhere between 0-5%

What are the alternatives? The central bank sets the base rate to 10% and the economy and all its participants just agree to a depression?

This also fundamentally makes sense because it is obvious the central bank can not push real rates beyond what the market could sustainable bare. So the only option out is for the economy to increase inflation so the real rate of return is somewhere in the 0-5% range

Having said this I think real rates are going to be zero or even negative for this technological cycle which broadly is going to be 2010-2040 beyond 2040 they will get even more negative

There is also a play with productivity.
If productivity is increasing the real economy can afford to pay higher real returns
Well productivity has been low for various reasons and the result is lower ability to bear real returns so lower nominal returns too

GreatApe

Thrugelmir wrote: »

Why would you see a problem. You don't have the resources the BOE has at it's disposal

Between now and 2050 almost all returns are going to be -100% to bet otherwise is to bet near AI will not happen. That bet was lost around 2015 when the first true AIs were developed and proven.

The HPC cheerleaders will be proven right all they need to do is hold on another 20-30 years the robots will then build them a free house and they can claim they saw the 100% hpc five decades before it happened :beer: