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

Strummer22

MattMattMattUK said:

Strummer22 said:

I'm going to take a punt and say inflation at the next update on Wed 20th will be below the 4% forecast. Around 3.8 or 3.9%. The first rate cut will be in May, by which time headline inflation will be about 1.5% and core inflation down to nearly 2%, maybe 2.5%. Base rate will be 4% or below by the end of next year. 

Whilst I would very much like that to be correct, I doubt we will have seen more than one 0.25% cut at most, down to 5%. I do not think the BoE will get serious about cutting rates until it is very obvious that they have overshot and we go into deflationary territory, which will late 2024 or early 2025.

So we agree the BoE will need to cut rates a fair bit next year, but not that they will. Only time will tell! 

RelievedSheff

Rates will be held again this month. No need for them to do anything in either direction right now.

As for when they will start to cut rates. They won't do anything until either the US or the Eurozone start to lower rates. They won't want to be the first big economy to starting cutting rates.

sevenhills

RelievedSheff said:

Rates will be held again this month. No need for them to do anything in either direction right now.

As for when they will start to cut rates. They won't do anything until either the US or the Eurozone start to lower rates. They won't want to be the first big economy to starting cutting rates.

If the USA cuts rates in mid 2024, the UK Government will want rates cutting before a winter election, if they can wait that long.

Hoenir

Strummer22 said:

MattMattMattUK said:

Strummer22 said:

I'm going to take a punt and say inflation at the next update on Wed 20th will be below the 4% forecast. Around 3.8 or 3.9%. The first rate cut will be in May, by which time headline inflation will be about 1.5% and core inflation down to nearly 2%, maybe 2.5%. Base rate will be 4% or below by the end of next year. 

Whilst I would very much like that to be correct, I doubt we will have seen more than one 0.25% cut at most, down to 5%. I do not think the BoE will get serious about cutting rates until it is very obvious that they have overshot and we go into deflationary territory, which will late 2024 or early 2025.

So we agree the BoE will need to cut rates a fair bit next year, but not that they will. Only time will tell! 

Unlikely there'll be significant cuts unless there's a serious economic downturn. The rises we've had so far haven't been given the opportunity to impact fully yet. Controlling inflation will take several more years at least. Correspondingly with QT chugging away in the background the cost of borrowing will remain high. A return to the pre 2007 GFC era. 

lojo1000

BoE will cut in 2024 but the issue they face is that it will take so much time for cuts to have an effect.

to be cutting 50bps at a time then there is a serious downturn 

if they cut at 25bps each time as inflation comes down (and there is no recession) then they'll take 8*6 weeks (between meetings); i.e. one whole year to cut 2%, down to 3% rates. And even with that rate, many will still refix onto higher mortgage rates.

and even then the lags are going to take another 1-2 years to have a positive impact

the negative second-round effects from the reason why they are cutting in 8 subsequent meetings will have a more detrimental effect than the positive impact from their cuts.

and this all assumes OPEC et al don't get oil back to $100 and any other negative scenario that may occur (and they have a bad habit of occurring when economic times are hard)

Strummer22

Hoenir said:

Strummer22 said:

MattMattMattUK said:

Strummer22 said:

I'm going to take a punt and say inflation at the next update on Wed 20th will be below the 4% forecast. Around 3.8 or 3.9%. The first rate cut will be in May, by which time headline inflation will be about 1.5% and core inflation down to nearly 2%, maybe 2.5%. Base rate will be 4% or below by the end of next year. 

Whilst I would very much like that to be correct, I doubt we will have seen more than one 0.25% cut at most, down to 5%. I do not think the BoE will get serious about cutting rates until it is very obvious that they have overshot and we go into deflationary territory, which will late 2024 or early 2025.

So we agree the BoE will need to cut rates a fair bit next year, but not that they will. Only time will tell! 

Unlikely there'll be significant cuts unless there's a serious economic downturn. The rises we've had so far haven't been given the opportunity to impact fully yet. Controlling inflation will take several more years at least. Correspondingly with QT chugging away in the background the cost of borrowing will remain high. A return to the pre 2007 GFC era. 

The two sentences I highlighted bold appear contradictory if, like me, you think the rate rises have already gone further than necessary (or that keeping them this high for longer than a few months more is unnecessary). Inflation is already falling and will probably fall faster in the spring as the effect of rate rises filters through and high month-on-month inflation numbers drop out of the annual calculation.

It will take until May or June 2024 to control inflation (by which I mean get it below 2% target).

There is a risk of deflation by the end of 2024, particularly if such a prospect appears on the horizon and rates aren't cut in response.

The BoE will be very glad those earlier in this thread opining that 7%+ interest rates would be needed did not get their way.

Hoenir

Strummer22 said:

Hoenir said:

Strummer22 said:

MattMattMattUK said:

Strummer22 said:

I'm going to take a punt and say inflation at the next update on Wed 20th will be below the 4% forecast. Around 3.8 or 3.9%. The first rate cut will be in May, by which time headline inflation will be about 1.5% and core inflation down to nearly 2%, maybe 2.5%. Base rate will be 4% or below by the end of next year. 

Whilst I would very much like that to be correct, I doubt we will have seen more than one 0.25% cut at most, down to 5%. I do not think the BoE will get serious about cutting rates until it is very obvious that they have overshot and we go into deflationary territory, which will late 2024 or early 2025.

So we agree the BoE will need to cut rates a fair bit next year, but not that they will. Only time will tell! 

Unlikely there'll be significant cuts unless there's a serious economic downturn. The rises we've had so far haven't been given the opportunity to impact fully yet. Controlling inflation will take several more years at least. Correspondingly with QT chugging away in the background the cost of borrowing will remain high. A return to the pre 2007 GFC era. 

The two sentences I highlighted bold appear contradictory if, like me, you think the rate rises have already gone further than necessary (or that keeping them this high for longer than a few months more is unnecessary). Inflation is already falling and will probably fall faster in the spring as the effect of rate rises filters through and high month-on-month inflation numbers drop out of the annual calculation.

Not in the least contradictory. There's no guidebook available for exiting and reversing the QE era. Going to be lots of twists and turns over the next decade. 

MeteredOut

lojo1000 said:

BoE will cut in 2024 but the issue they face is that it will take so much time for cuts to have an effect.

to be cutting 50bps at a time then there is a serious downturn 

if they cut at 25bps each time as inflation comes down (and there is no recession) then they'll take 8*6 weeks (between meetings); i.e. one whole year to cut 2%, down to 3% rates. And even with that rate, many will still refix onto higher mortgage rates.

and even then the lags are going to take another 1-2 years to have a positive impact

the negative second-round effects from the reason why they are cutting in 8 subsequent meetings will have a more detrimental effect than the positive impact from their cuts.

and this all assumes OPEC et al don't get oil back to $100 and any other negative scenario that may occur (and they have a bad habit of occurring when economic times are hard)

I infer from this that you expect cuts to take rates down 2% (or perhaps 3%) at some point over the next 5 years. I don't. I suspect toward the end of 2024 we'll be nearer 4-4.25% and then it'll stay around that (perhaps 0.5% either side) for quite a few years, bringing interest rates closer to their long term "norm" (if there is such a thing).

lojo1000

i expect Fed, ECB and BoE will all start cutting in 2024, slowly at first as they're always hesitant to act. 

but i expect the macro picture to worsen as (i say above) those cuts will not help until another 12-24 months down the line.

in 2025 they'll be cutting hard 50bps at a time (hope they don't also resort to QE but they might) and we'll get another rally - once again larger than the last as the swings just get bigger and bigger due to the debt/leverage getting ever larger (higher prices=more debt=more currency printed=lower currency value).

everyone piles in to that rally as they've seen it all before > stocks, property, gold, bitcoin all rocket as the currency collapses (due to banks/shadow banks) printing ever more credit.

who knows what happens next but i suspect by that time china will have invaded taiwan or another war in the middle east. anything to take the electorates' mind off of the economy (if you're lucky enough to live in a country which still has an election).

extreme leaders will emerge on both the left and the right (brexit>Trump>Milei>) and everyone will get ever more abusive on social media about who is right and wrong

on the counter....things always play-out slower than i expect but they have played out.

but you can always expect recessions and booms and wars. that much is guaranteed. we just don't know when.

....meanwhile we can all dream of our childhood and happier times.

hope you all have a good day and remember to smile. it might make someone's day.

[Deleted User]

I think rates will stay the same and start droping in 2024.