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

Aberdeenangarse

The markets seem to be pricing in the possibility of a 0.50% hike. My hunch is they’ll just raise by 0.25% then make some hawkish comments about being able to take tougher measures in the future if inflation continues to be a problem.

RelievedSheff

I think with Hunt's green light earlier in the month to do whatever it takes to get inflation down, that the rate rise today will be 0.5%.

If they were serious it would be a full 1% and get the job done with but I don't think they have the balls to do that.

michaels

poppy10_2 said:

Seraphi said:

poppy10_2 said:

Myrrdinthemage said:

inflation is supply side, not demand side (and therefore the solution should be to lower rates to cause investment 

People keep trotting out that line, but it's simply not borne out by the facts. Core inflation (stripping out energy and food) is the highest it has been for over 30 years, led by massive rises in recreation and leisure, hospitality and discretionary spending.

The data shows that retail sales remain high. Car sales on finance remain high. House prices remain high. Pubs and restaurants are packed. Builders and tradespeople are booked up months in advance as everyone gets home improvements and extensions done. There is massive demand out there. It needs to be dampened down for inflation to call 

House prices have fallen significantly. People just haven't noticed because of not that great numeracy and the increasing burden of mortgages.

If a house worth £277k in April 2022 is worth £286k in April 2033 (3.5% increase) it may look as if house prices have increased. However it's actually a 5.2% decrease when you consider inflation (April CPI 8.7%). That house needs to be worth £301k in April 2023's money - just to stay level. 

That calculation is only true if wages are rising in line with inflation.

As it is, wage rises have been well under the rate of inflation. So house prices have become more expensive relative to wages. Yes they might be cheaper to an international investor who is converting from dollars to sterling but that doesn't apply to the majority of purchasers, who have seen their value of their salaries eroded by inflation more than house prices have been eroded by inflation. Thus making that house more expensive in real terms for them to buy.

Perhaps you need to check the latest wage data average increase is over 7%  And the inflation comparison is not completely meaningless - for example compared to food, houses are about 15% cheaper than a year ago.

Aberdeenangarse

Increase by 0.50% !

m_c_s

2 out of the 9 voted for no increase. Economists eh .......

propertyhunter

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

lojo1000

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

michaels

m_c_s said:

2 out of the 9 voted for no increase. Economists eh .......

At some point the doves are going to be correct.  Just as the bank was behind the curve on the way up, given the dynamics of the mortgage market, they will also be behind on the way back down.

Of course money could have been taken out of the economy via a fiscal tightening - quick to switch on and off, immediate in impact, hits all earners equally rather than just borrowers, helps with debt so a double long term win (less debt to pay interest on and lower risk premia due to better debt to DP ratio) but sadly politically untenable

lmitchell

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

Scrap VAT on energy. Enforce lower standing charges. Reduce fuel duty.

Those three solutions alone would get us back down fast - and without rates having to go much higher than 3%.

Sarah1Mitty2

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

It is the result of too much money printing, especially during Covid, hopefully they are going to put the brakes on full now on the ridiculous amount of nearly free money that has been sloshing around in the system, the stamp duty holiday was another massive policy error as well.