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

smipsy

4.5% is needed at a minimum, there is still so much money sloshing around in the system.
4.75% would get us through this faster, but would hurt more, so no way BoE are doing 4.75%.

To be fair, I can even imagine them not doing 4.5% in order to protect the Holy Child, the Housing Market, from faltering.

housebuyer143

smipsy said:

4.5% is needed at a minimum, there is still so much money sloshing around in the system.
4.75% would get us through this faster, but would hurt more, so no way BoE are doing 4.75%.

To be fair, I can even imagine them not doing 4.5% in order to protect the Holy Child, the Housing Market, from faltering.

They should be more concerned about the banks failing tbh. That potentially could happen the more base rate goes up. 

IAMIAM

housebuyer143 said:

smipsy said:

4.5% is needed at a minimum, there is still so much money sloshing around in the system.
4.75% would get us through this faster, but would hurt more, so no way BoE are doing 4.75%.

To be fair, I can even imagine them not doing 4.5% in order to protect the Holy Child, the Housing Market, from faltering.

They should be more concerned about the banks failing tbh. That potentially could happen the more base rate goes up. 

Yet most top UK banks boast pre tax profit of 5 billion EACH per ANNUM currently

housebuyer143

IAMIAM said:

housebuyer143 said:

smipsy said:

4.5% is needed at a minimum, there is still so much money sloshing around in the system.
4.75% would get us through this faster, but would hurt more, so no way BoE are doing 4.75%.

To be fair, I can even imagine them not doing 4.5% in order to protect the Holy Child, the Housing Market, from faltering.

They should be more concerned about the banks failing tbh. That potentially could happen the more base rate goes up. 

Yet most top UK banks boast pre tax profit of 5 billion EACH per ANNUM currently

Even so, maybe the UK banks are in okay positions but they are heavily invested outside the UK so are susceptible to world issues such as other banks failing. 
They do not have anywhere near enough money to handle everyone withdrawing their cash so if the banking market looks unsafe you could end up with them collapsing due to a run on them. 
No doubt we are in a better position than we were at the financial crash but we have just seen how the collapse of two overseas banks can heavily impact the UK.

mi-key

It's very unusual for traditional running banks to collapse. Those that do tend to be new, without huge reserves, or are operating in some different way. 

A bank like Lloyds or Barclays are never going to collapse ( or be allowed to collapse ) and these are the ones that the vast majority of people in the UK bank with. 

The top 6 banks / building societies in the UK have 90% of the market share so a large scale withdrawal of money, or a huge collapse isn't going to happen.

IAMIAM

mi-key said:

It's very unusual for traditional running banks to collapse. Those that do tend to be new, without huge reserves, or are operating in some different way. 

A bank like Lloyds or Barclays are never going to collapse ( or be allowed to collapse ) and these are the ones that the vast majority of people in the UK bank with. 

The top 6 banks / building societies in the UK have 90% of the market share so a large scale withdrawal of money, or a huge collapse isn't going to happen.

Agreed. I would add HSBC to this list. Barclays and HSBC are (imo) the two that have a monopoly across the world, particularly the Middle East and China. I would say Lloyds/RBS and Natwest are very UK focussed. 

housebuyer143

IAMIAM said:

mi-key said:

It's very unusual for traditional running banks to collapse. Those that do tend to be new, without huge reserves, or are operating in some different way. 

A bank like Lloyds or Barclays are never going to collapse ( or be allowed to collapse ) and these are the ones that the vast majority of people in the UK bank with. 

The top 6 banks / building societies in the UK have 90% of the market share so a large scale withdrawal of money, or a huge collapse isn't going to happen.

Agreed. I would add HSBC to this list. Barclays and HSBC are (imo) the two that have a monopoly across the world, particularly the Middle East and China. I would say Lloyds/RBS and Natwest are very UK focussed. 

When I say collapse, I mean government bailout as the government would never let them collapse. That in itself would be disastrous for the economy though.
Any bank that does any investments outside the UK is susceptible to world markets. 

lojo1000

CREDIT (MONEY SUPPLY) IS NOW CONTRACTING

Banks will not go under as BoE will lend in unlimited quantity. But lending by banks into the economy is falling sharply and is now negative - see BoE chart below; i.e. money supply/credit in the economy is contracting as people are less confident in their economic future.

On the way up, prices rise, confidence rises, people borrow ever more to afford those prices. It's a vicious circle which most of willing to ignore whilst they have a job.

On the way down, as confidence falls people borrow less (banks are less willing to lend) and hence demand falls leading to pressure on prices to fall.

Remember only recently has credit growth turned negative. We will now likely see retail sales volumes fall even faster and contract on a value basis as well (even with 10% inflation) meaning year on year revenue declines for retailers, distributors and wholesalers.

2023 will be the year of consumer discretionary firms collapsing. The usual culprits are: furniture retailers, trendy restaurant groups; both goods and services will be impacted.

The usual BoE response at this point is to cut rates. But I doubt even the short-sighted people at the BoE would dare cut rates with inflation over 10%.

lojo1000

....and supply could be cut just as quick as demand falls. Firms have held on to labour up to now due to the pain of getting their business back to normal after Covid.

But they will not hoard labour if they experience falling revenues and do not see govts/central banks easing in response.

Firms will go back to their 2020 playbook of cutting supply and that will act to support prices. If they do it fast enough, we could see inflation rise, not fall.

lojo1000

Latest BBA mortgage rate released today.