Are we expecting BOE to remain at 4.75% on 8th February 2025?

Strummer22

lojo1000 said:

Strummer22 said:

lojo1000 said:

BarelySentientAI said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

We benefited at the expense of our collective children.

Or if you are a glass half-full type of person, our children benefitted from more jobs because more people were spending more money which required more products and services.

the young need to run faster just to try and break-even. ... Buy hey-ho, as long as GDP is increasing now, I guess that is all that matters to the "glass half-full" optimists.

Yes, optimists will look on the bright side and acknowledge you cannot buy a bag of sweets for a penny any more or buy a four bed detached house for £10k anymore but life in general is easier, more interesting, more comfortable and with more choices than ever before.

"The young" have never had it so good and all they need to do is manage their expectations and make better more informed choices in life...

All relative generational gains have come through technology/productivity not easy fiscal/ monetary policy.

You cannot buy a "bag of sweets for a penny anymore" not because the sweets are better but because our currency is worth less. That is not a sign of progress.

Having easy monetary policy allows less productive firms to stay in business at the expense of younger, more efficient businesses who are starved of capital which would otherwise be freed up by allowing inefficient businesses to go under.

Do you think you need to easy fiscal/monetary policy to achieve progress?

I'm not sure that hiking up interest rates to create deflation and mass redundancies counts as progress either, nor would it suddenly result in massive investment in 'younger' businesses.

Agreed. Rates should be maintained where they are now. I'm not seeing deflation or mass redundancies.

Not seeing deflation yet.

The BoE is supposed to be looking ahead, given that interest rate changes take 18 months + to take full effect.

If they predict inflation will be well below 2% target at the end of their 2 year forecast period, that would be cause for considering a rate cut. 

"given that interest rate changes take 18 months + to take full effect."

This line is trotted out so often, people who lack the ability or will to question what they are told accept it as a constant truth. It is not.

The economy changes. We are not the same economy now as markets pre-empt easy monetary policy. This is how central banks could simply promise QE and rates cuts and markets start to salivate since 2008 (and why we are in this mess).

The issue with moving rates up and down on the expectations of the impact 2-3 years ahead is that you are constantly chasing your tail.

LET THE MARKETS ADJUST PRICES.

If businesses fail as they cannot afford their overdraft let them die. Let the capital flow to businesses who are better at managing their capital.

Cutting rates to incentivise more money creation without increasing supply is just creating inflation. Inflation appears in assets if money flows to the wealthy (through monetary easing) and to general inflation if money flows to the general population (through fiscal easing).

Govts and central bankers will tell people they are managing the economy. And the media and people who lack a critical mind will repeat what they say. They are influencing the economy, but they bring no benefit, only uncertainty.

Morning rant over. For now.....

So, did the increase in interest rates do anything to bring down inflation from its peak in 2022? 

sevenhills

Strummer22 said:

So, did the increase in interest rates do anything to bring down inflation from its peak in 2022? 

What caused the inflation in 2022, has the cause now gone away?

Strummer22

sevenhills said:

Strummer22 said:

So, did the increase in interest rates do anything to bring down inflation from its peak in 2022? 

What caused the inflation in 2022, has the cause now gone away?

Not any one single thing. And yes, the causes have mostly gone away, or at least become the 'new normal' and are not having an inflationary effect. We don't have an alternative reality in which to test 'what ifs' - but what if interest rates hadn't been increased? How much higher would inflation be now? I don't know, and don't really expect anyone else to know. But if the increase in rates did have some effect in reducing inflation, and those inflationary pressures have decreased, then rate cuts should be on the horizon to prevent deflation in the coming years.

Rate changes are supposed to affect inflation by affecting consumer spending, right? And most people don't want to change their spending habits until they are forced to. Hence the lag. It does exist. No point pretending it doesn't, even though the 'signal to noise' ratio might be small.

lojo1000

Strummer22 said:

lojo1000 said:

Strummer22 said:

lojo1000 said:

BarelySentientAI said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

We benefited at the expense of our collective children.

Or if you are a glass half-full type of person, our children benefitted from more jobs because more people were spending more money which required more products and services.

the young need to run faster just to try and break-even. ... Buy hey-ho, as long as GDP is increasing now, I guess that is all that matters to the "glass half-full" optimists.

Yes, optimists will look on the bright side and acknowledge you cannot buy a bag of sweets for a penny any more or buy a four bed detached house for £10k anymore but life in general is easier, more interesting, more comfortable and with more choices than ever before.

"The young" have never had it so good and all they need to do is manage their expectations and make better more informed choices in life...

All relative generational gains have come through technology/productivity not easy fiscal/ monetary policy.

You cannot buy a "bag of sweets for a penny anymore" not because the sweets are better but because our currency is worth less. That is not a sign of progress.

Having easy monetary policy allows less productive firms to stay in business at the expense of younger, more efficient businesses who are starved of capital which would otherwise be freed up by allowing inefficient businesses to go under.

Do you think you need to easy fiscal/monetary policy to achieve progress?

I'm not sure that hiking up interest rates to create deflation and mass redundancies counts as progress either, nor would it suddenly result in massive investment in 'younger' businesses.

Agreed. Rates should be maintained where they are now. I'm not seeing deflation or mass redundancies.

Not seeing deflation yet.

The BoE is supposed to be looking ahead, given that interest rate changes take 18 months + to take full effect.

If they predict inflation will be well below 2% target at the end of their 2 year forecast period, that would be cause for considering a rate cut. 

"given that interest rate changes take 18 months + to take full effect."

This line is trotted out so often, people who lack the ability or will to question what they are told accept it as a constant truth. It is not.

The economy changes. We are not the same economy now as markets pre-empt easy monetary policy. This is how central banks could simply promise QE and rates cuts and markets start to salivate since 2008 (and why we are in this mess).

The issue with moving rates up and down on the expectations of the impact 2-3 years ahead is that you are constantly chasing your tail.

LET THE MARKETS ADJUST PRICES.

If businesses fail as they cannot afford their overdraft let them die. Let the capital flow to businesses who are better at managing their capital.

Cutting rates to incentivise more money creation without increasing supply is just creating inflation. Inflation appears in assets if money flows to the wealthy (through monetary easing) and to general inflation if money flows to the general population (through fiscal easing).

Govts and central bankers will tell people they are managing the economy. And the media and people who lack a critical mind will repeat what they say. They are influencing the economy, but they bring no benefit, only uncertainty.

Morning rant over. For now.....

So, did the increase in interest rates do anything to bring down inflation from its peak in 2022? 

Yes.

Did cutting rates to zero and govts spending trillions they don't have exacerbate the inflation in the first place (or was it just "Russia"!)?

5% is the average historic level of rates. So now leave rates where they are.

My point is, does the central bank add value to the economy by adjusting rates up and down to counteract the economic cycle? Market prices can do the same work at no cost.

Workers and productivity gains generate wealth, not govts/central bank policy (and neither do they facilitate it).

If the central bank keeps rates at 5%, markets will adjust prices whether the problem is excess or insufficient demand.

The mistake govts/central banks make is to step in before market prices adjust.

It's the equivalent of propping up dying trees and claiming they're healthy since they are not falling down.

Adding to govt debt and increasing the money supply over every economic cycle drives a wedge between asset owners and non-asset owners (a.k.a. workers).

Under this monetary system, you literally need to own assets to not fall behind. For those who come into life with nothing and each subsequent generation, do you not see the issue ahead?

Does anyone here think intervention by central banks/govts adds value to the economy as a whole over time? And perhaps does that not matter to you since you are only concerned with your job/your property/your pension?

sevenhills

lojo1000 said:

Did cutting rates to zero and govts spending trillions they don't have exacerbate the inflation in the first place (or was it just "Russia"!)?
5% is the average historic level of rates. So now leave rates where they are.

My point is, does the central bank add value to the economy by adjusting rates up and down to counteract the economic cycle? Market prices can do the same work at no cost.

Workers and productivity gains generate wealth, not govts/central bank policy (and neither do they facilitate it).

I very much agree about what creates more wealth. But isn't a major reason for Governments varying interest rates international money markets?

If the USA increases/decreases their rates, then we need to do the same.

lojo1000

sevenhills said:

lojo1000 said:

Did cutting rates to zero and govts spending trillions they don't have exacerbate the inflation in the first place (or was it just "Russia"!)?
5% is the average historic level of rates. So now leave rates where they are.

My point is, does the central bank add value to the economy by adjusting rates up and down to counteract the economic cycle? Market prices can do the same work at no cost.

Workers and productivity gains generate wealth, not govts/central bank policy (and neither do they facilitate it).

I very much agree about what creates more wealth. But isn't a major reason for Governments varying interest rates international money markets?

If the USA increases/decreases their rates, then we need to do the same.

I think govts set policy based on getting re-elected. Central bankers set policy based on minimising criticism against themselves.

Currently c.bankers are trying to look strong by holding off on rate cuts arguing they need to fight inflation. But just wait until 1 major company goes bust, they will buckle and cut rates arguing policy "has done its job" and "we need to focus on employment".

It is the amount of debt and speculation which is restrictive. That is what needs to be unwound. Not rates.

True, there is interconnectedness as money is fungible but the FX rate should take care of that - again let markets adjust.

BikingBud

MobileSaver said:

BikingBud said:

I'm only a simple man but what benefit did we, the big we society, actually get from low interest rates for all those years?

The general consensus is that low interest rates benefit all of us because they encourage spending which grows the economy.

Why is encouraging people to send money they do not have a good thing?

It can only end in tears.

ReadySteadyPop

MobileSaver said:

BikingBud said:

I'm only a simple man but what benefit did we, the big we society, actually get from low interest rates for all those years?

The general consensus is that low interest rates benefit all of us because they encourage spending which grows the economy.

lojo1000 said:

We benefited at the expense of our collective children.

Or if you are a glass half-full type of person, our children benefitted from more jobs because more people were spending more money which required more products and services.

  Pity low rates are not coming back, wonder what will happen to the economy?

ReadySteadyPop

BarelySentientAI said:

BikingBud said:

I'm only a simple man but what benefit did we, the big we society, actually get from low interest rates for all those years?

Only way to know for sure is to go back in time and then see how the last 15 years play out with higher rates.  Everything else is just theorising.

The theorisers almost all agree that we would be worse off now if that had happened though.

The people who borrowed too much wouldn`t be worse off.

ReadySteadyPop

BikingBud said:

MobileSaver said:

BikingBud said:

I'm only a simple man but what benefit did we, the big we society, actually get from low interest rates for all those years?

The general consensus is that low interest rates benefit all of us because they encourage spending which grows the economy.

Why is encouraging people to send money they do not have a good thing?

It can only end in tears.

As many people predicted.