Interest rates - impact of 45% u turn

ChilliBob

So it looks like the 45% reduction has been scrapped. We can see the pound rallying, I'm wondering whether this will dampen the interest rate rises people are predicting?

Don't get me wrong, they will stil increase and need to for a multitude of reasons, but I'm wondering if this factor will knock a % or so off the estimates.

Perhaps time to lock in for a year with some capital rather than waiting...

InvesterJones

I don't think so. They still haven't balanced the books and are still refusing to publish scrutiny until late November, not the actions that will reassure markets of any competence.

Section62

ChilliBob said:

So it looks like the 45% reduction has been scrapped. We can see the pound rallying, I'm wondering whether this will dampen the interest rate rises people are predicting?

Don't get me wrong, they will stil increase and need to for a multitude of reasons, but I'm wondering if this factor will knock a % or so off the estimates.

Perhaps time to lock in for a year with some capital rather than waiting...

The economic impact of scrapping the 45% tax rate - and now its retention - has been hugely overstated.

Either way it won't make a 1% difference to the eventual BoE base rate.

msallen

Can't see it making much difference. It was more of a political thing than an economic one.

daveyjp

Forget the dollar situation, gilts are at 4%, that's the indicator of where the base rate is heading.  The other is the mortgage rates being offered.

dunstonh

So it looks like the 45% reduction has been scrapped. We can see the pound rallying, I'm wondering whether this will dampen the interest rate rises people are predicting?

Ironically, the abolition of the additional rate was one of the measures that was believed to be self funding by many analysts.

t1redmonkey

The bigger issue in the budget that'll affect interest rates was the unfunded way they're capping our energy bills rather than imposing a windfall tax on energy firms.

Flugelhorn

definitely more of a political "oh this didn't look good did it?" rather than having much impact - now if they had shifted the 40% threshold up a bit instead .... 

mark_cycling00

I see this move as more of a political thing. It seemed to the policy that got most angry press attention.

It will remove £45million of inflationary pressure from the economy of Wales (£80 billion). Almost too trivial to measure.

However it does signal to the markets that Truss is prepared to listen and reconsider, and not behave like an emerging markets finance minister. Although making your subordinate take the blame for a policy that you approved is a sign of a terrible leader.

Also, I feel that the markets get rattled by lack of information (they are a pricing mechanism and need good data)
So the initial FTSE drop and suspicion of a 1% rate increase needed in Nov may subside as the OBR data and others is released.

Just my thoughts. I hope others have alternative views to hear

jimexbox

Flugelhorn said:

definitely more of a political "oh this didn't look good did it?" rather than having much impact - now if they had shifted the 40% threshold up a bit instead .... 

Personal allowance should of been raised from 12,570. 

ChilliBob

Seems pretty unanimous views from you lot!

I thought it may have had a difference as ig may have *appeared* to be less money to find but as said above many felt this change would bring in enough revenue to cover its self anyway.

I shall continue chasing easy access highest rates for now and pounce on a fix at a later time. 

Really does look bad doesn't it though, hardly an image of an iron lady who doesn't change her mind   perhaps she will give more consideration to such big announcements in the future to avoid u turns like this!