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

lojo1000

House price inflation is rising.



How is the UK govt borrowing yield at over 4% with UK mortgage borrowers paying less than 4%?










Is housing once again a one-way street with the BoE backstopping mortgages?

ReadySteadyPop

I think the next one will be a "Hold" unless the budget triggers another bond market event.

RelievedSheff

I would like to see them hold but I have a niggling suspicion that they will drop them by 0.25% next month instead.

lojo1000

What reason do they have to cut other than to satisfy all those crying for excess gains on their asset portfolios?

Strummer22

Latest inflation is lower than predicted at 1.7%. A rise in inflation next month is likely, but as high the ~2.5% mentioned by the BoE looks unlikely.

So the BoE is almost certainly going to cut, then maybe cut again in December. As to the reasons, one would be that they reckon the economy can be encouraged to grow without a significant risk of causing inflation to spike. 

lojo1000

Employment near historic highs both nominal and rate. Inflation falling from highs, importantly both core and services inflation. Real wages positive by around 1-2%.

So incomes rising, the worst is over, jobs-a-plenty.

What on God's earth is the need for 2 further rate cuts this year?

The MPC moves rates around to make us think they need to move rates around. The economy and markets do a perfectly good job of adjusting prices that central banks are not needed. They only create added uncertainty as everyone tries to guess their next move.

movilogo

;What on God's earth is the need for 2 further rate cuts this year?

;

Unemployment is 4%. Lots of people are economically inactive. 
Lower interest will lead to lower mortgage meaning more money on hands to people to spend on discretionary item, thus rolling money in economy leading to higher GDP.
Lower borrowing cost means businesses are more likely to borrow and invest in business resulting in more jobs leading to more tax for treasury.

lojo1000

movilogo said:

;What on God's earth is the need for 2 further rate cuts this year?

;

Unemployment is 4%. Lots of people are economically inactive. 
Lower interest will lead to lower mortgage meaning more money on hands to people to spend on discretionary item, thus rolling money in economy leading to higher GDP.
Lower borrowing cost means businesses are more likely to borrow and invest in business resulting in more jobs leading to more tax for treasury.

Where do I start.........!

Look back at historic unemployment rates. Today is near historic lows. There will always be a lot of inactive people. Cutting rates does not incentivise these people to work.

Cutting rates increases the money supply and creates monetary demand. It does not make the economy more productive or efficient.

Lowering rates is like letting out your belt when you should really be getting fit. It's the easiest and most rewarding action in the short term but does not make for a healthy life.

The argument that lower rates encourages activity is only true in the short term. Otherwise, let's cut rates to zero, print money and give it out to everyone.

ReadySteadyPop

lojo1000 said:

movilogo said:

;What on God's earth is the need for 2 further rate cuts this year?

;

Unemployment is 4%. Lots of people are economically inactive. 
Lower interest will lead to lower mortgage meaning more money on hands to people to spend on discretionary item, thus rolling money in economy leading to higher GDP.
Lower borrowing cost means businesses are more likely to borrow and invest in business resulting in more jobs leading to more tax for treasury.

Where do I start.........!

Look back at historic unemployment rates. Today is near historic lows. There will always be a lot of inactive people. Cutting rates does not incentivise these people to work.

Cutting rates increases the money supply and creates monetary demand. It does not make the economy more productive or efficient.

Lowering rates is like letting out your belt when you should really be getting fit. It's the easiest and most rewarding action in the short term but does not make for a healthy life.

The argument that lower rates encourages activity is only true in the short term. Otherwise, let's cut rates to zero, print money and give it out to everyone.

Not really, low rates have been encouraging massive activity in the housing market (it is a bubble really) for 15+ years, it is starting to slow down now though as the reality of higher rates starts to bite.

https://propertyindustryeye.com/completion-rates-continue-to-fall-despite-a-surge-in-housing-supply/

lojo1000

ReadySteadyPop said:

lojo1000 said:

movilogo said:

;What on God's earth is the need for 2 further rate cuts this year?

;

Unemployment is 4%. Lots of people are economically inactive. 
Lower interest will lead to lower mortgage meaning more money on hands to people to spend on discretionary item, thus rolling money in economy leading to higher GDP.
Lower borrowing cost means businesses are more likely to borrow and invest in business resulting in more jobs leading to more tax for treasury.

Where do I start.........!

Look back at historic unemployment rates. Today is near historic lows. There will always be a lot of inactive people. Cutting rates does not incentivise these people to work.

Cutting rates increases the money supply and creates monetary demand. It does not make the economy more productive or efficient.

Lowering rates is like letting out your belt when you should really be getting fit. It's the easiest and most rewarding action in the short term but does not make for a healthy life.

The argument that lower rates encourages activity is only true in the short term. Otherwise, let's cut rates to zero, print money and give it out to everyone.

Not really, low rates have been encouraging massive activity in the housing market (it is a bubble really) for 15+ years, it is starting to slow down now though as the reality of higher rates starts to bite.

https://propertyindustryeye.com/completion-rates-continue-to-fall-despite-a-surge-in-housing-supply/

I guess this comes down to your definition of short term. I take your point.

My point is that cutting rates below what the economy needs to encourage rising productivity only works to entice higher debt and investment into less productive uses than would otherwise be the case with higher rates.

Central banks can stimulate housing as they've done since 2008 but at some point (even when rates went to zero), the actual stimulus effect wore off as people could only borrow so much (ultimately incomes hold down valuations).

Monetary stimulus encourages activity but without gains in productivity the economy will once again slow down.

Cutting rates, making ROI higher net of interest costs allows profit targets to be met with lower efficiency/productivity gains.

The extreme example being, the authorities give everyone money and we all invest in housing, flipping houses to the next person for ever higher prices. None of us are actually producing anything (no houses being built) and yet we all show a profit. The issue is in real terms money is worth less and those who do not take part find their wages do not go as far.