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

Strummer22

lojo1000 said:

Don't forget, BoE is cutting in the face of rising yield curve hoping to expand the money supply when markets are already telling them, "That's enough".

It's clear enough from your sig, but it looks like you believe markets are efficient. I believe markets are frequently reactionary, so are inefficient. Therefore, a rate cut is not necessarily a foolish move despite recently rising yields. 

lojo1000

Strummer22 said:

lojo1000 said:

Don't forget, BoE is cutting in the face of rising yield curve hoping to expand the money supply when markets are already telling them, "That's enough".

It's clear enough from your sig, but it looks like you believe markets are efficient. I believe markets are frequently reactionary, so are inefficient. Therefore, a rate cut is not necessarily a foolish move despite recently rising yields. 

Short term markets are inefficient but longer than a day(s) and everyone has had their chance to trade their view.

Markets do not predict future rates they simply reach a price which reflects investors/traders wants. If there is money to be made arbitraging, it will be taken which helps keep prices consistent.

But I am sure that if you leave markets alone and they know the BoE rate is 5% and will not change, everyone can plan with more certainty.

Bailey spent a lot of time today at the presser admitting they cannot predict the neutral rate and have uncertainty over inflation, future govt policy, global macro factors, fx, etc, etc. So how the hell do they think them guessing where they think rates should be is aiding peoples decision making?

lojo1000

Today's UK employment numbers...

Unemployment rate near record lows and wages >2x inflation target at >4%.

UK 5y govt yields at 1 yr highs and climbing (think mortgage rates). The markets are expecting strong nominal growth. That's either output or inflation, you decide.

Either way, continuing to cut base rates in the face of long term rates moving higher and higher is either naive or stupid.

Hoenir

Interest rates continue to normalise. ........ as far as mortgages is concerned. 

RelievedSheff

Rates will be held at the next meeting.

lojo1000

There is a very clear but subtle signaling by CB members - including Powell tonight - that rates are not going to be cut as fast as the market hopes. 

The final mile (1%) of inflation down to the 2% target is proving tough. Fear is (as i've been saying for over a year now) that wages and services inflation is potentially going higher if CBs continue to cut rates.

Look out below. 

....I think it's why gold has suffered in recent days. Stocks are next! Then property.

lojo1000

We've had some recent negative economic news - retail sales and PMIs - which have increased chances of cuts in 2024/2025.

This reflects the change in markets where now markets expect rate cuts in reaction to any weak data whereas CBs should wait and let prices adjust to market conditions.

Cutting rates in reaction to weaker economic data - when inflation is above target and unemployment rate near record lows - is just making this economy less productively efficient, adding debt and making the long term situation worse.

The issue CBs have created is the economy is so inefficient and weighed down by debt that the only way growth can come about is by rate cuts and the use of higher debt.

What they should do is let inefficient businesses get wiped out so capital if free to move to efficient businesses.

RelievedSheff

I think they will hold rates in December.

Hoenir

lojo1000 said:

What they should do is let inefficient businesses get wiped out so capital if free to move to efficient businesses.

Suspect the recent budget is going to shake the tree in 2025 and onwards into 2026. Not as if there weren't enough challenges for business in general to contend with already. Then there's no knowing what Trump is actually going to do either once he's in office. That will ripple out across the global economy. 

movilogo

My crystal ball says rates will remain at 4.75% in December 2024.
By mid to late next year rates may hover around 4.50% to 4.25%. Don't expect below 4.25% in 2025.