Will interest rates rise next month?

Albermarle

rothers said:

https://capital.com/projected-interest-rates-in-5-years-in-the-uk

That article thinks that the boebr will peak at 3%

Yes and others are still talking about 5% +, so probably best to go for a mid range of say 4% ?, 

cwep2

rothers said:

https://capital.com/projected-interest-rates-in-5-years-in-the-uk

That article thinks that the boebr will peak at 3%

That's quite an old article (pre-Kwasi mini-budget). Whilst gilt markets are almost back to pre-mini budget levels, there is still a significant expectation that the BoE will continue to hike rates, one important argument for doing so is that given rate hikes by in the US and EU (the EU raised rates 0.75% this week and the US is expected to raise 0.75% on 2nd Nov, the US also raised by 0.75% in September, when the BoE 'only' raised 0.5%) if the BoE raises rates more slowly it causes the currency to lose value, increasing the price on imports (especially energy) which will make inflation higher/worse.

There are financial futures that trade in the markets which settle based on UK interest rates and these imply BoE rates peaking at 4.5-5.0% next year (they were as high as almost 6% at one stage). If enough people thought BoE rates would not go above 4% then they could make a *lot* of money on these, suffice to say these are a pretty good indication of a neutral forecast across various viewpoints. You could quote people who think interest rates will be well above 6% as well, just like you can cherry pick a few quotes saying they will not go above 3%, everyone is entitled to a view, these markets are a good way to crystalise what the consensus view is.

There is a political aspect to interest rates even if the BoE is independent, simply put if the government makes fiscal decisions that would increase inflation (eg unfunded tax cuts...) then it forces the BoE to raise rates more than they would have to otherwise since their primary mandate is to keep inflation under control. So it would be useful/optimal for there to be a two way sharing of information between Govt and BoE, so that you don't end up with the govt making fiscal decisions to put the foot hard on the accelerator forcing the BoE to put their foot hard on the brakes at the same time. It would be nice to have some joined up thinking whilst still leaving the BoE to make independent decisions. It is widely thought that if they had known about the mini-budget contents before their meeting just a few days beforehand, then they would have had to raise rates more (by at least 0.75%) hence the talk of an emergency rate hike a few days later, only avoided by 1) taking other stabilisation measures and 2) a reversal of much of the mini-budget measures.