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

Angelcrackers

Do we think that the Budget will send rates up or stop a cut in November?

penners324

Pretty sure they'll cut. Though depends on how stupid the government are in debt fuelled give aways.

Sterling is getting a bit too strong at the moment as well

RelievedSheff

A cut is pretty much nailed on next month.

Hoenir

penners324 said:

Sterling is getting a bit too strong at the moment as well

Given that BOE have two mandates. One being financial stability and the second controlling inflation. A slowly strengthening pound is a long term positive. Imported inflation is something that the BOE cannot directly control. 

Baldeagle095

I have a feeling BOE won't cut.

PixelPound

Baldeagle095 said:

I have a feeling BOE won't cut.

Will they hold for another month to see how the budget affects things. 

Those with mortgages think a cut is overdue, those with savings think they should be cautious and delay a bit longer. 

Hoenir

No need to wait a month. The money markets are already expressing their view. A Trump election win isn't going to be helpfull either. 

MeteredOut

I think a cut in Nov is still more likely than not, but it looks like further cuts could slower than previously expected.

"Susannah Streeter, head of money and markets at Hargreaves Lansdown, said expectations for interest rate cuts had been scaled back, given forecasts that the Budget could push up inflation over the next two years.

"Financial markets are now not expecting rates to fall below 4% until 2026," she said.

"This has been reflected in the spike in UK gilt yields to some extent, but given that sterling has remained lower against the dollar, it also indicates that there is a growing nervousness about the way Labour is steering the economy."

https://www.bbc.co.uk/news/articles/cx2n0eeep90o

ReadySteadyPop

https://news.sky.com/story/money-blog-treasury-will-be-concerned-as-pound-falls-and-borrowing-costs-surge-after-budget-13040934

ReadySteadyPop

lojo1000 said:

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.

Higher rates are the solution in my opinion, encourage everyone to save.