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

IAMIAM

I just feel 0.25% every 6 weeks is ridiculous. Just move it to 5.5% or something and leave it there for a good 6-9 months. This monthly drip feed is annoying for everyone and makes no difference whatsoever as its not dramatic enough 

sevenhills

poppy10_2 said:

They've been way too slow. The Fed raised rates faster and as a result got inflation under control before it got entrenched. We on the other hand have had had a timid and incompetent central bank, too scared of short term pain to take the right decisions and making things worse in the long term. We will now have to have higher rates for longer.

We need a 0.5% hike this week but I am sure they will only do another feeble 0.25% and prolong this mess even further

UK interest rates were lower to start with, but the UK increased its interest rate in Dec 2021, and the USA in 2022, but their rates are now higher.

I believe it will only be a 0.25% increase because our Government has too much debt.

Interest rates are a blunt instrument for fighting inflation, but they continue to be central banks’ main tool. It's an unfair burden on those with mortgages and their low-rate fixed-term has ended.

lojo1000

Ouch. Higher than expected though there is better news on producer prices, distribution and retail is clearly still passing on a lot of higher costs - and possibly reacting to strong demand.

50bps tomorrow is a real possibility but I still think they will do 25bps and talk tough.

Core inflation is a nightmare for BoE here. It is actually going up. Take a look at the monthly figures below. The last 4 months is the highest 4m period over the whole year.

Eirambler

A short sharp shock is needed here. They won't do it because, as we have learnt, they can't do anything right, but a 0.75% or full 1% increase is what's needed here, not this constant drip feed of ineffective 0.25% rises. 

Pain incoming for a lot of people, but it's necessary pain to get some stability back into the economy.

Chemistry777

Market still expecting 0.25% tomorrow but also rates to surpass 6% by end of year.

https://twitter.com/MacroMicroMe/status/1671407278317264901?cxt=HHwWioDTsY2EhLIuAAAA

naf123

May well put rates up to 6% tomorrow and get on with the pain. Short and sharp rather than prolonged and slow

Zerforax

If we don't get a 0.5% increase tomorrow, I expect we'll get another 0.25% increase for the next 2 meetings..

michaels

Sarah1Mitty2 said:

MattMattMattUK said:

Sarah1Mitty2 said:

OhWow said:

michaels said:

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Rents relate to supply and demand, landlords did not cut rents when mortgage costs fell and can not just automatically pass on increases to mortgage costs, whatever simplistic picture the TV News might present.

The obvious answer is to build more houses!

Otherwise we just keep passing this; high house prices and people struggling with an interest rate increase/ not enough empty rentals to create lower rents, down to the next generation.

I don`t think this will work, the better route is to make houses cheaper by raising rates, this is the route they are now taking.

Houses will not get cheaper because interest rates rise apart from a temporary blip, the issue is supply and demand imbalance and the only way to correct that is for dwelling construction to exceed the number of new dwellings. They are not taking this as a measure to influence house prices, but as a measure to tackle inflation and prop up Sterling. 

That doesn`t make sense, you are confusing desire for a certain property with true demand, everyone viewing property already lives somewhere, as the thread title says the cost of borrowing is rising so two things can happen, either the cost of the houses that people desire comes down, or they just stay where they already live! The government would be forced to build if "supply and demand" was causing mass homelessness, but it isn`t and they won`t!

This is simply wrong.  Population is increasing by 600k per year and families continue to fragment (more widows/widowers just as one example.  Another is the massive increase in student numbers mean more 18-21 yearolds have their own place rather than still being in the family home).

Property thus needs to be rationed, currently this is done via price - people live with their parents/estranged partner/rent a shared house/lodge because they can't afford a place of their own.  If prices fall then more of this reluctant sharers would be able to afford a place - but there are no houses for them to move to so unless supply increases then there is no way we will see lower housing costs - perhaps we will see lower purchase prices but only if this is because higher mortgage costs mean that the share of income spent is the same.

Myrrdinthemage

If the aim is to reduce inflation, given that inflation is supply side, not demand side (and therefore the solution should be to lower rates to cause investment in energy efficiency /productivity increase) or driven by Brexit than raising interest rates isn't going to work (as we're already seeing) If they don't realise this, they're going to keep putting rates up - so they will go much higher than predicted (unless someone can talk some sense into government/BoE)

michaels

Myrrdinthemage said:

If the aim is to reduce inflation, given that inflation is supply side, not demand side (and therefore the solution should be to lower rates to cause investment in energy efficiency /productivity increase) or driven by Brexit than raising interest rates isn't going to work (as we're already seeing) If they don't realise this, they're going to keep putting rates up - so they will go much higher than predicted (unless someone can talk some sense into government/BoE)

They need to bring supply and demand into balance to stop prices increasing.  Given we have voted to reduce labour supply (Brexit) and are dead set against building (houses, infrastructure, wind and solar power generation etc etc)  it will need to be a reduction in demand that brings the two into balance.  Problem is with employment strong, wages increasing and a big overhang of money from the covid (financial) injections it is taking a lot more interest rate increases than was anticipated to do so.

Sadly using fiscal rather than monetary policy seems to be politically unacceptable despite the huge cost of an out of control deficit.