Bank of England MPC meeting November 3rd 2022 - what are your predictions and how are you preparing

PK_London

Serve_the_Servants said:

5 day decline in the pound. I thought someone said we were in safe hands now? 🤭

I thought this was interesting. So the markets seem to think the BOE are planning to prematurely stop hiking rates to Sterling is falling against the dollar again - which means higher inflation - which means higher rates. I think base rates at 6% next summer are more likely than not despite what the BOE are saying.

RelievedSheff

PK_London said:

Serve_the_Servants said:

5 day decline in the pound. I thought someone said we were in safe hands now? 🤭

I thought this was interesting. So the markets seem to think the BOE are planning to prematurely stop hiking rates to Sterling is falling against the dollar again - which means higher inflation - which means higher rates. I think base rates at 6% next summer are more likely than not despite what the BOE are saying.

I think a lot will ride on what Hunt announces next week and how the markets react to that.

Sterling is currently making small gains against the dollar and the euro this morning. Hopefully it will hold its own until next Thursday and not drop any further.

Hunt needs to tell the markets what they want to hear next week and not pander to the public.

PK_London

RelievedSheff said:

PK_London said:

Serve_the_Servants said:

5 day decline in the pound. I thought someone said we were in safe hands now? 🤭

I thought this was interesting. So the markets seem to think the BOE are planning to prematurely stop hiking rates to Sterling is falling against the dollar again - which means higher inflation - which means higher rates. I think base rates at 6% next summer are more likely than not despite what the BOE are saying.

I think a lot will ride on what Hunt announces next week and how the markets react to that.

Sterling is currently making small gains against the dollar and the euro this morning. Hopefully it will hold its own until next Thursday and not drop any further.

Hunt needs to tell the markets what they want to hear next week and not pander to the public.

This is the key. For far too long the government's borrowing and spending policy was very much pandering to the public and disregarding the markets. Truss's mini budget represented peak government arrogance. If you're going to go cap in hand to the markets to borrow money to fund public spending that you cannot support on tax receipts alone, then the markets will absolutely dictate interest rates, mortgage rates and government spending. 

Sea_Shell

The trouble is (always, it seems) that "the markets" don't get a vote on polling day. 😉

Aberdeenangarse

‘ The Bank of England risks hurtling toward another bond market crisis as new signs of strain bubble up and threaten to force another intervention, City traders have warned.

Traders have pointed to mounting stress in the so-called “repo” market and short-dated UK debt, known as gilts, just weeks after the post mini-Budget bond chaos pushed Britain’s pensions funds to the brink of collapse.

Repo markets are a crucial part of the financial plumbing where cash is lent in return for collateral such as government debt. They are an important source of short-term funding and collateral for banks.

Analysts warned over a potential shortage of gilts as they pointed to signs of pressure in the Bank’s first bond sales under quantitative tightening (QT) last week, the reversal of quantitative easing. Experts believe Threadneedle Street could need to step in again to smooth the running of markets after it was forced to launch bond purchases to ease turbulence in the wake of the mini-Budget.’

https://www.telegraph.co.uk/business/2022/11/06/bank-england-risks-repeat-mini-budget-bond-markets-chaos-warn/

Altior

PK_London said:

RelievedSheff said:

PK_London said:

Serve_the_Servants said:

5 day decline in the pound. I thought someone said we were in safe hands now? 🤭

I thought this was interesting. So the markets seem to think the BOE are planning to prematurely stop hiking rates to Sterling is falling against the dollar again - which means higher inflation - which means higher rates. I think base rates at 6% next summer are more likely than not despite what the BOE are saying.

I think a lot will ride on what Hunt announces next week and how the markets react to that.

Sterling is currently making small gains against the dollar and the euro this morning. Hopefully it will hold its own until next Thursday and not drop any further.

Hunt needs to tell the markets what they want to hear next week and not pander to the public.

This is the key. For far too long the government's borrowing and spending policy was very much pandering to the public and disregarding the markets. Truss's mini budget represented peak government arrogance. If you're going to go cap in hand to the markets to borrow money to fund public spending that you cannot support on tax receipts alone, then the markets will absolutely dictate interest rates, mortgage rates and government spending. 

Ordinarily the market will do this. Unless the entity that was mostly buying government debt at ridiculously low interest rates was...the government. And the rest of it was being hedged against market corrections via risky derivatives. 

In essence, the gilt market had/has been malformed for several years.