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

Hoenir

ReadySteadyPop said:

Hoenir said:

ReadySteadyPop said:

fergie_ said:

The other questions are whether the bank will continue to follow America's lead? And will Japan raising rates affect anything here?

If Japan do more hikes the effect on borrowing costs will be felt.

Japan has it's own unique set of problems. That the other Central Banks are attempting to avoid with the implementation of QT now.  Japan is also experiencing a bumpy period of economic performance. 

So are you saying no more hikes, or more hikes from Japan?

Who knows. This was the first increase in interest rates since 2007.  Been stuck in a rut for a very long time. A very different mentality to us in the West. 

Hoenir

ReadySteadyPop said:

There was discussion on SKY news today about the possibility of more rate hikes from the BOE I  did not catch the whole conversation though.

On the basis that BOE base rate is now in the "normal" range.  Small tweaks up or down wouldn't be considered abnormal in terms of the BOE's remit. In response to events as they unfold. The sharp increase in rates hasn't caused the turmoil that was predicted. 

ReadySteadyPop

Hoenir said:

ReadySteadyPop said:

There was discussion on SKY news today about the possibility of more rate hikes from the BOE I  did not catch the whole conversation though.

On the basis that BOE base rate is now in the "normal" range.  Small tweaks up or down wouldn't be considered abnormal in terms of the BOE's remit. In response to events as they unfold. The sharp increase in rates hasn't caused the turmoil that was predicted. 

That is because large numbers of people still have to come off their fixes, and because banks have been offering super cheap mortgage deals to try and drum up more customers, the bond market may not let them get away with that in future, and as the bond markets are ultimately running borrowing costs small tweaks from the BOE would be pretty pointless anyway?

Hoenir

ReadySteadyPop said:

Hoenir said:

ReadySteadyPop said:

There was discussion on SKY news today about the possibility of more rate hikes from the BOE I  did not catch the whole conversation though.

On the basis that BOE base rate is now in the "normal" range.  Small tweaks up or down wouldn't be considered abnormal in terms of the BOE's remit. In response to events as they unfold. The sharp increase in rates hasn't caused the turmoil that was predicted. 

That is because large numbers of people still have to come off their fixes, and because banks have been offering super cheap mortgage deals to try and drum up more customers, the bond market may not let them get away with that in future, and as the bond markets are ultimately running borrowing costs small tweaks from the BOE would be pretty pointless anyway?

My comment was of a general nature rather than mortgage specific. Mortgages are risk assessed and have been stress tested for some years. The poor quality lending that was seen in the run up to 2008. Has long since been eradicated.  

There's the whole dimension of shadow banking over which the BOE (or any Central Bank) has zero control.  Hence why decisions made are data dependent. Not media hype driven. There's no knowing where the stress will be seen. Though there's much talk of the US commercial property sector being one. 

lojo1000

We are now seeing some evidence of 1 cut, as priced by bond yields, within 6 months (by September). And still 3 cuts within 12 months. So likely these cuts start in Q3 2024 and continue into 2025.

lojo1000

3 weeks since my last post above and yields on the 6m bill are 10bps higher suggesting the first cut is getting further away.

With the base rate at 5.25% and the 6m yield at 5.27%, it looks like markets are now pricing the first cut some time between Oct'24 and Apr'25.

I don't think the BoE helps matters by hinting a cut is coming, that just makes people confident they can go out and spend.

MattMattMattUK

lojo1000 said:

I don't think the BoE helps matters by hinting a cut is coming, that just makes people confident they can go out and spend.

As ever with the BoE it is always slow to react, it was too slow raising interest rates, so had to raise them higher than would otherwise have been needed and it will be slow to start cutting them, so increasing the economic contraction and extending the period of pitiful growth afterwards. 

The cuts during Covid made little sense and when inflation started to surge, as it would obviously would, with global energy costs rising off the back of a huge injection of free cash into the UK (and global) economy, the BoE waited, then did not make big enough rises during the initial period, but then carried on raising them when they had already reached the required level. 

It will now wait too long before both making the first cut and then further cuts after that. I am not one who thinks that interest rates should return to the sub 1% range of the past, but floating in the 2-3% range would be much better for the economy. The BoE is still (as of 31/03) conducting quantitative easing which is inflationary, whilst also saying it has to keep interest rates up to restrain inflation. The economy is in recession, will likely experience deflation later this year or early next, interest rates are 1.45% above inflation, it will be interesting to see the figures next Tuesday, but I suspect that they will further widen that gap. 

Maka344

Thanks for all the detailed analysis in this thread. We are about to remortgage, and stuck between a fix or a tracker. 

The fixed rate is 4.57% @£2888pm and the tracker is 5.40% (tracking 0.15% above base) @£3208pm. With the fix, a new fixed rate/product switch can be applied at 18 months. Decisions, decisions. We were hoping that rate cuts would be firmly on the cards right above now. 

RelievedSheff

Interest rate cuts are a way off yet. It will be no change again at the next meeting.

Strummer22

RelievedSheff said:

Interest rate cuts are a way off yet. It will be no change again at the next meeting.

Agreed, unfortunately the meeting comes before April's inflation data is released. It will be more interesting to see April's inflation data (published in May). A big drop in the headline rate is baked in due to energy price cap, but the other factors at play will also be very interesting. 

If the headline rate released next week is 3.1% as expected, it may well fall to 1.5% or less next month. If other factors also continue heading in the right direction, how might MPC vote in June? Probably to hold, but it 3 - 4 members might vote for a reduction. Like @MattMattMattUK I think they're moving too slowly. But a drop to 5% by August looks pretty certain to me.