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

RelievedSheff

london21 said:

This is not sustainable.

more rent increases and more landlords might sell up

BOE rates are still someway below the long term average.

More increases are on the way and there is very little reason for rates to start coming down!

Strummer22

Are the long-term averages relevant though? Why should they revert to the mean, unless all other economic indicators also revert to the mean? It certainly seems that economic growth won't. 

Sarah1Mitty2

london21 said:

This is not sustainable.

more rent increases and more landlords might sell up

Harder to just sell up when people can`t access cheap mortgages anymore?

smipsy

london21 said:

This is not sustainable.

more rent increases and more landlords might sell up

Don't quite see why the BoE would be basing their decisions on what's going to happen to landlords, aside from nepotism. Officially, the BoE works to keep prices low and stable, not to benefit landlords.

lojo1000

Let's see how earnings come in tomorrow. They don't seem to be falling consistent with even a 5% inflation target, let alone 2%.

Personally, I think inflation will come down sharply but only after we see unemployment rise.

Aberdeenangarse

I think inflation will drop considerably in the next few months, then spike again towards the end of the year when energy prices rise. I wouldn’t  be surprised to see inflation at around 7% by December missing the Government’s and the BoE’s targets.

Strummer22

Aberdeenangarse said:

I think inflation will drop considerably in the next few months, then spike again towards the end of the year when energy prices rise. I wouldn’t  be surprised to see inflation at around 7% by December missing the Government’s and the BoE’s targets.

How high do you see energy prices going?

housebuyer143

Strummer22 said:

Aberdeenangarse said:

I think inflation will drop considerably in the next few months, then spike again towards the end of the year when energy prices rise. I wouldn’t  be surprised to see inflation at around 7% by December missing the Government’s and the BoE’s targets.

How high do you see energy prices going?

Supply and demand. Gas will no doubt be sold to the highest bidder when the cold weather comes back around.

Strummer22

housebuyer143 said:

Strummer22 said:

Aberdeenangarse said:

I think inflation will drop considerably in the next few months, then spike again towards the end of the year when energy prices rise. I wouldn’t  be surprised to see inflation at around 7% by December missing the Government’s and the BoE’s targets.

How high do you see energy prices going?

Supply and demand. Gas will no doubt be sold to the highest bidder when the cold weather comes back around.

The EPG will still be set at £3,000 until the end of Q1 2024, limiting upside energy inflation compared to the winter just gone. 

sevenhills

lojo1000 said:

CREDIT (MONEY SUPPLY) IS NOW CONTRACTING

Banks will not go under as BoE will lend in unlimited quantity. But lending by banks into the economy is falling sharply and is now negative - see BoE chart below; i.e. money supply/credit in the economy is contracting as people are less confident in their economic future.

On the way up, prices rise, confidence rises, people borrow ever more to afford those prices. It's a vicious circle which most of willing to ignore whilst they have a job.

On the way down, as confidence falls people borrow less (banks are less willing to lend) and hence demand falls leading to pressure on prices to fall.

Remember only recently has credit growth turned negative. We will now likely see retail sales volumes fall even faster and contract on a value basis as well (even with 10% inflation) meaning year on year revenue declines for retailers, distributors and wholesalers.

2023 will be the year of consumer discretionary firms collapsing. The usual culprits are: furniture retailers, trendy restaurant groups; both goods and services will be impacted.

The usual BoE response at this point is to cut rates. But I doubt even the short-sighted people at the BoE would dare cut rates with inflation over 10%.

M2 money supply has fallen from its peak, but it's still very high.
https://tradingeconomics.com/united-kingdom/money-supply-m2