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

ReadySteadyPop

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. 

Yes, BOE and ECB more or less saying there is a long way to go today, expect rates to be higher for some time. The rates being offered by lenders at the moment are just a reaction to the drop in mortgage applications, down about 40% I believe.

Hoenir

ReadySteadyPop 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. 

Yes, BOE and ECB more or less saying there is a long way to go today, expect rates to be higher for some time. The rates being offered by lenders at the moment are just a reaction to the drop in mortgage applications, down about 40% I believe.

The US commenced QE in the Autumn of 2008. Goes without saying that the full effects of unwinding are likely to take a decade or longer. Another roller coaster ride. 

Strummer22

ReadySteadyPop 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. 

Yes, BOE and ECB more or less saying there is a long way to go today, expect rates to be higher for some time. The rates being offered by lenders at the moment are just a reaction to the drop in mortgage applications, down about 40% I believe.

They're also a reaction to market rates (swap rates etc) falling. They have been falling on the expectation that central banks will fairly soon need to cut interest rates.

Would the BoE have any justification for keeping rates as high as they are after June 2024 when headline and core inflation are probably (by my estimation) going to be at or below 2% target and the economy is flatlining or worse, and some of the impact of previous rate rises will still be filtering though? 

RelievedSheff

Strummer22 said:

ReadySteadyPop 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. 

Yes, BOE and ECB more or less saying there is a long way to go today, expect rates to be higher for some time. The rates being offered by lenders at the moment are just a reaction to the drop in mortgage applications, down about 40% I believe.

They're also a reaction to market rates (swap rates etc) falling. They have been falling on the expectation that central banks will fairly soon need to cut interest rates.

Would the BoE have any justification for keeping rates as high as they are after June 2024 when headline and core inflation are probably (by my estimation) going to be at or below 2% target and the economy is flatlining or worse, and some of the impact of previous rate rises will still be filtering though? 

Judging by the "new members" name I think you can guess who they are and what they think the outcome is going to be...........................

sevenhills

Strummer22 said:

Would the BoE have any justification for keeping rates as high as they are after June 2024 when headline and core inflation are probably (by my estimation) going to be at or below 2% target and the economy is flatlining or worse, and some of the impact of previous rate rises will still be filtering though? 

Wage increases are currently around 7%, so the shortage of workers would need to end and pay rates come down to roughly the same rate as inflation.

Strummer22

sevenhills said:

Strummer22 said:

Would the BoE have any justification for keeping rates as high as they are after June 2024 when headline and core inflation are probably (by my estimation) going to be at or below 2% target and the economy is flatlining or worse, and some of the impact of previous rate rises will still be filtering though? 

Wage increases are currently around 7%, so the shortage of workers would need to end and pay rates come down to roughly the same rate as inflation.

Yes to be fair to BoE wages are increasing faster than inflation, but have they ever used the fact that wages are lagging inflation (when that is the case) to justify lowering rates?? I don't know for sure but I doubt it!

Averaged over the last 2 years wages have lagged inflation by a significant margin, so maybe BoE should take into account that real wages are not higher than they were 1-2 years ago. 

Strummer22

Headline and core inflation both negative this month.

The markets are basically ignoring the BoE's bluster and pricing in lots of cuts next year. I'm inclined to agree with the markets, the momentum is clearly deflationary and recessionary. Rate cuts will be needed, barring any surprise inflationary pressures (which are very possible). It's just a question of when the BoE thinks a move in that direction is actually required. 

Speaking of bluster, Gov Bailey has been quoted as saying ""The last mile [of reducing inflation] really does lean heavily on... restrictive policy,", and to be fair to him this quote is from a couple of months ago.

The reality is, however, that it looks like policy is more than restrictive enough already. The annualised headline inflation rate over the last 6 months is 0.6%. For core inflation it's 2.2% so still a touch high, but it also has higher month-on-month figures to come out of the actual annual calculation during spring 2024. So basically, time heals all wounds and with no further action headline inflation will probably be below 2% by April or May.

Hoenir

Strummer22 said:

sevenhills said:

Strummer22 said:

Would the BoE have any justification for keeping rates as high as they are after June 2024 when headline and core inflation are probably (by my estimation) going to be at or below 2% target and the economy is flatlining or worse, and some of the impact of previous rate rises will still be filtering though? 

Wage increases are currently around 7%, so the shortage of workers would need to end and pay rates come down to roughly the same rate as inflation.

Yes to be fair to BoE wages are increasing faster than inflation, but have they ever used the fact that wages are lagging inflation (when that is the case) to justify lowering rates?? I don't know for sure but I doubt it!

Higher wages are reflected in higher output costs. Companies don't simply absorb them but pass them on in the form of higher prices.The UK economy is 81% service industry based.

Spies

Quick question which I don't feel like it's worth making a thread for, my fixed deal ends end of this month, if I hold off fixing again and roll on to SVR, will I have to pay a penalty to take another fix if I just wait until Feb? 

Hoenir

Spies said:

Quick question which I don't feel like it's worth making a thread for, my fixed deal ends end of this month, if I hold off fixing again and roll on to SVR, will I have to pay a penalty to take another fix if I just wait until Feb? 

No. Standard Variable Rate has no ties in's. Worth checking what your lenders rate is. Can be expensive.