BOE and a recession.

lmitchell

If there's a huge reversal in the coming hours from Hunt - inc. scaling back the energy capping bill - I would envisage interest rates rising to no more than 4%. Borrowing is going to tumble now rather than sky-rocket, so that will definitely curb inflation.

mi-key

lmitchell said:

If there's a huge reversal in the coming hours from Hunt - inc. scaling back the energy capping bill - I would envisage interest rates rising to no more than 4%. Borrowing is going to tumble now rather than sky-rocket, so that will definitely curb inflation.

Well he has pretty much u-turned on everything, hopefully this will have a settling effect. At least Hunt is cautious and a safe pair of hands

lmitchell

mi-key said:

lmitchell said:

If there's a huge reversal in the coming hours from Hunt - inc. scaling back the energy capping bill - I would envisage interest rates rising to no more than 4%. Borrowing is going to tumble now rather than sky-rocket, so that will definitely curb inflation.

Well he has pretty much u-turned on everything, hopefully this will have a settling effect. At least Hunt is cautious and a safe pair of hands

Safe pair of hands might be overblowing it, but he's certainly much less cavalier than Truss & Kwarteng. BoE will be happier this morning, for sure. Sonia swap rates have fallen considerably today too.

DiseasedBunny

lmitchell said:

If there's a huge reversal in the coming hours from Hunt - inc. scaling back the energy capping bill - I would envisage interest rates rising to no more than 4%. Borrowing is going to tumble now rather than sky-rocket, so that will definitely curb inflation.

However energy is still sky high, along with everything else so don’t get your hopes up too much 

TonyTeacake

I totally agree and in the long term interest rates will keep rising.

Aberdeenangarse

DiseasedBunny said:

lmitchell said:

If there's a huge reversal in the coming hours from Hunt - inc. scaling back the energy capping bill - I would envisage interest rates rising to no more than 4%. Borrowing is going to tumble now rather than sky-rocket, so that will definitely curb inflation.

However energy is still sky high, along with everything else so don’t get your hopes up too much 

Energy price guarantee now going to be scrapped in April. That’ll go down well!

lmitchell

TonyTeacake said:

I totally agree and in the long term interest rates will keep rising.

That's not necessarily true. Deflation is anticipated in the US next year, which will force the Fed to pivot mid-2023. Yes, energy prices are still going to play a part in the UK and Europe, but if core inflation begins to fall here and the remainder is intrinsically linked to energy, BoE is unlikely to penalise the taxpayer for this. I think we're looking at an interest rate environment of 3.00-4.00% for the next 10 years IMO. Still historically low, but a huge step up from the previous decade.

brownbagsFTB

TonyTeacake said:

I totally agree and in the long term interest rates will keep rising.

No they won’t. That’s the whole point of the u-turns, to ensure market stability by less government borrowing. The BoE base rate will now peak at one point lower than projected next year (4% instead of 5%) and inflation should drop over the course of the year too meaning that by 2025 they can begin to reduce the rate again. The government have a vested interest in working with the BoE to keep interest rates lower as they have national debt which is also vulnerable to sharp interest rate rises.

TonyTeacake

lmitchell said:

TonyTeacake said:

I totally agree and in the long term interest rates will keep rising.

That's not necessarily true. Deflation is anticipated in the US next year, which will force the Fed to pivot mid-2023. Yes, energy prices are still going to play a part in the UK and Europe, but if core inflation begins to fall here and the remainder is intrinsically linked to energy, BoE is unlikely to penalise the taxpayer for this. I think we're looking at an interest rate environment of 3.00-4.00% for the next 10 years IMO. Still historically low, but a huge step up from the previous decade.

Yes this is key what you say "Deflation is anticipated in the US next year".

Now this is what they anticipate but I really can't see it happening. High inflation and high interest rates for the most of this decade.

lmitchell

TonyTeacake said:

lmitchell said:

TonyTeacake said:

I totally agree and in the long term interest rates will keep rising.

That's not necessarily true. Deflation is anticipated in the US next year, which will force the Fed to pivot mid-2023. Yes, energy prices are still going to play a part in the UK and Europe, but if core inflation begins to fall here and the remainder is intrinsically linked to energy, BoE is unlikely to penalise the taxpayer for this. I think we're looking at an interest rate environment of 3.00-4.00% for the next 10 years IMO. Still historically low, but a huge step up from the previous decade.

Yes this is key what you say "Deflation is anticipated in the US next year".

Now this is what they anticipate but I really can't see it happening. High inflation and high interest rates for the most of this decade.

Judging by your posting history, you've been insistent on this for a long, long time. This is not a forum for fantasy economics. It's important to be real about the picture. The era of free money is over - Covid has put paid to that - but a bank rate of 3%+ IS a high interest rate in the context of the LAST decade. A bank rate of 5-6% would cripple the government as well as the housing market, so unless you're a sadist I don't see why you would want that to happen to people. Hence why Hunt has done what he's done this morning.