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

Altior

But sentiment overrides practicality. That's why the PMI is a reasonably important variable. 

In the property market there is uncertainty. Significant uncertainty, and that is contagious. 

The instability hits the wider economy doesn't it. If the BoE were playing with a straight bat, that should be part of their dynamism. But does anyone have confidence that the BoE is on top of their strategy? I would say absolutely not. 

lojo1000

This is a somewhat extroverted version of the BTL portfolio investor:

Bank of England Destroying Buy To Let | UK Housing Market 2023 | Samuel Leeds

He talks about buying property with debt and then taking out equity as the price goes up to then invest in another property.

I wonder if he knows he is actually describing the best known and dumbest investment strategy in the world of forex?

Martingale investment strategy


I'm sure this isn't the typical property investor but oh my lord, if this is anywhere near typical of the mentality of the private property landlord then there will be a rude awakening when the banks come calling.

Sarah1Mitty2

lojo1000 said:

This is a somewhat extroverted version of the BTL portfolio investor:

Bank of England Destroying Buy To Let | UK Housing Market 2023 | Samuel Leeds

He talks about buying property with debt and then taking out equity as the price goes up to then invest in another property.

I wonder if he knows he is actually describing the best known and dumbest investment strategy in the world of forex?

Martingale investment strategy


I'm sure this isn't the typical property investor but oh my lord, if this is anywhere near typical of the mentality of the private property landlord then there will be a rude awakening when the banks come calling.

Reality starts to get discussed from about comment number three, LOL, quite funny actually. There is no "typical landlord" IMO, the smart one`s bought years ago or fixed for ten. Would love to see a BTL YouTube video from 2005 though!

RelievedSheff

My money is on 5.5% for the next round of hikes.

dougson

Sarah1Mitty2 said:

dougson said:

Sarah1Mitty2 said:

Strummer22 said:

Sarah1Mitty2 said:

themanfromportobello said:

Sarah1Mitty2 said:

https://www.bbc.co.uk/news/business-66088718

Will we see resignations?

... from who? BoE? Govt.? Banks? I'd very much doubt it from any!

PM and Chancellor, like the last time we hit this level.

I'm not aware of any clause in UK legislation saying the PM and chancellor must resign if the average 5 year fixed mortgage rate hits 6%.  

Truss and Kwarteng's actions (sweeping inflationary budget without OBR oversight) directly caused that spike. It was also clear that their resignations helped calm the markets. Hard to see how the current PM and chancellor have directly caused rates to be as they are now, or that their resignations would make things better

 So what has changed?

The change is that the previous reason for hitting such interest rate heights was unfunded tax giveaways and an attempt to run public finances in a completely different way to every other established currency, and actively resisting any scrutiny of the plan. 

Consequently the pound tanked and increasing interest rates was the only way to maintain value of sterling.

This time round, we have some independent opinions of our economic strategy, some forecasting, the pound is stabilised and other major economies have done similar things.

In the same way that the 2008 credit crunch wasn't Gordon Brown's fault, this wasn't Sunak's fault. Much like Brown, I expect the voters to punish him at the next general election. 

The idea that decades of money printing (and the crazy printing excesses during Covid) and the eventual results were down to Truss is equally flawed IMO, Brown paved the way for chaos in the same way that Sunak did when he was chancellor.

I never claimed that Truss was responsible for anything with regards the economy prior to becoming PM.

To suggest Gordon Brown, who lost an election 12 years prior, is responsible for a 5% overnight downswing in the value of GBP, rather than the LT/KK duo who announced the budget which caused this reaction feels misleading.

Of course printing money is, by design, inflationary, as such any form of "quantitative easing" is ultimately inflationary and depending on size of the capital injection, may impact on interest rates and exchange rates. However, this impact can be vastly mitigated by gaining an independent impact assessment, or perhaps even having an outline of a concept as to how it might be paid for.

It was demonstrably the credibility of the proposed budget that caused the Truss spike, whereas there are some other external factors - as well as the impact of printing money - that have lead to the current interest rate.

To return to topic, I think we will see another incremental 0.25 increase and I think the rate will keep increasing until it's higher than inflation. When inflation will fall is a far trickier prediction. 

Altior

There were all kinds of shenanigans going on around the time of the mini budget. Mainly Fed policy, surprising hiking rates by 75 basis points, and forward messaging, government debt pricing, the BoE dumping sterling assets, bizarre Bailey messaging and the looming LDI catastrophe. GBP is 20% stronger now compared to September. Is that because Hunt took over and certain parts of the mini budget were cancelled? Of course not, abject nonsense. 

Altior

I've mentioned it before on these boards but essentially, money printing and carrying national debt means that the Fed dictate banks rates to us (and most of the western world). Arguably Brown set that ball rolling. 

It's quite easy now to think that 5-6% is/was expected, but back then hardly any commentators thought that was a realistic prospect, certainly not the BoE themselves and nobody was calling for it. Personally I believe the BoE did know, but did not want to admit it, and were hoping against hope.

They should have raised rates significantly last year, but they apparently have no accountability or contrition, and we are where we are.  

lojo1000

Altior said:

I've mentioned it before on these boards but essentially, money printing and carrying national debt means that the Fed dictate banks rates to us (and most of the western world). Arguably Brown set that ball rolling. 

It's quite easy now to think that 5-6% is/was expected, but back then hardly any commentators thought that was a realistic prospect, certainly not the BoE themselves and nobody was calling for it. Personally I believe the BoE did know, but did not want to admit it, and were hoping against hope.

They should have raised rates significantly last year, but they apparently have no accountability or contrition, and we are where we are.  

I've been pondering how the central banks react in the coming downturn since they already have lending facilities open to the commercial banks in unlimited quantities.

Lending will only grow if there is demand for loans from the consumer and business or government.

That means in the face of what most will recognise as the highest risk / most leveraged economy we've seen in our lifetimes, someone needs to be raising their borrowing.

Do lenders lend at 'normal' margins of 1%-3% or do they raise margins to reflect risk? Overnight CB rates can be zero but that does not mean 2y-10y rates will not be over 5% (we weren't far from this in 2009).

The only way to get lending done at non-penal rates is for the CBs to go back to ZIRP AND re-ignite QE.

Only when investors REALLY believe the CBs will once again put a floor under prices will they be prepared to step in. Especially since we all know - at this point - inflation is still a potential crisis scenario.

If they do - and I think they will - we get the final, incredible asset bubble. Either the CBs keep it going or admit defeat and let it fail. 

lojo1000

Currys boss: Smart speaker sales have fallen off a cliff

"Nearly 18% of goods at the chain were bought on credit this year, compared with 13% last year."

The extension of credit creates new debt/money in the economy and acts against falling inflation. It's the same with the impact from people going onto interest only or asking for repayment holidays.

This is why inflation hangs around longer and higher than one would otherwise expect. And it is why the BoE will continue hiking into a worsening economy.

The shock comes when the credit and repayment holidays run out. Then we get the tumbling of both demand and inflation.

Sarah1Mitty2

dougson said:

Sarah1Mitty2 said:

dougson said:

Sarah1Mitty2 said:

Strummer22 said:

Sarah1Mitty2 said:

themanfromportobello said:

Sarah1Mitty2 said:

https://www.bbc.co.uk/news/business-66088718

Will we see resignations?

... from who? BoE? Govt.? Banks? I'd very much doubt it from any!

PM and Chancellor, like the last time we hit this level.

I'm not aware of any clause in UK legislation saying the PM and chancellor must resign if the average 5 year fixed mortgage rate hits 6%.  

Truss and Kwarteng's actions (sweeping inflationary budget without OBR oversight) directly caused that spike. It was also clear that their resignations helped calm the markets. Hard to see how the current PM and chancellor have directly caused rates to be as they are now, or that their resignations would make things better

 So what has changed?

The change is that the previous reason for hitting such interest rate heights was unfunded tax giveaways and an attempt to run public finances in a completely different way to every other established currency, and actively resisting any scrutiny of the plan. 

Consequently the pound tanked and increasing interest rates was the only way to maintain value of sterling.

This time round, we have some independent opinions of our economic strategy, some forecasting, the pound is stabilised and other major economies have done similar things.

In the same way that the 2008 credit crunch wasn't Gordon Brown's fault, this wasn't Sunak's fault. Much like Brown, I expect the voters to punish him at the next general election. 

The idea that decades of money printing (and the crazy printing excesses during Covid) and the eventual results were down to Truss is equally flawed IMO, Brown paved the way for chaos in the same way that Sunak did when he was chancellor.

I never claimed that Truss was responsible for anything with regards the economy prior to becoming PM.

To suggest Gordon Brown, who lost an election 12 years prior, is responsible for a 5% overnight downswing in the value of GBP, rather than the LT/KK duo who announced the budget which caused this reaction feels misleading.

Of course printing money is, by design, inflationary, as such any form of "quantitative easing" is ultimately inflationary and depending on size of the capital injection, may impact on interest rates and exchange rates. However, this impact can be vastly mitigated by gaining an independent impact assessment, or perhaps even having an outline of a concept as to how it might be paid for.

It was demonstrably the credibility of the proposed budget that caused the Truss spike, whereas there are some other external factors - as well as the impact of printing money - that have lead to the current interest rate.

To return to topic, I think we will see another incremental 0.25 increase and I think the rate will keep increasing until it's higher than inflation. When inflation will fall is a far trickier prediction. 

I didn`t suggest that he was responsible for that event , I suggested that he was one of the main architects of the housing bubble which now leaves millions exposed to interest rate volatility, have you seen swap rates today for example?