Predictions: Interest rates over the next year or so... crystal ball time!

southone

The clocks go back an hour on Sunday and next week's budget is set to take us back to 1970s so without a crystal ball it's hard to tell but there is talk that this budget is likely to increase interest rates

MeteredOut

southone said:

The clocks go back an hour on Sunday and next week's budget is set to take us back to 1970s so without a crystal ball it's hard to tell but there is talk that this budget is likely to increase interest rates

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leosayer

Inflation is now below target and given recent experience of the market's reaction to unfunded government spending commitments, I expect the budget will avoid this.

However, we can only predict based on current knowledge. We've seen the BoE response to Covid bringing base rates as low as 0.10% only to be followed 3 years later with rates over 5% in response to a spike in energy prices amongst other things.

If I was forced to take a punt I would say we'll be at 3.5% in a year's time.

What_time_is_it

southone said:

The clocks go back an hour on Sunday and next week's budget is set to take us back to 1970s so without a crystal ball it's hard to tell but there is talk that this budget is likely to increase interest rates

Talk, yes. Actual evidence? Not much at all. The markets are still pricing an almost certain fall of 0.25% in November, and a strong chance of another 0.25% cut before Christmas. Lots of talk, but nobody putting money on it.

cwep2

Markets are forecasting one cut before end of this year (probably November, but if not December) and the next one by either Feb or March. I think given headline inflation is back down to below the target they will continue cutting, but core inflation has started to go back up and will make them hesitant to e.g. cut twice before Christmas. So two cuts by the spring is probably 70-80% chance (with 10-15% chance economy fares worse and they cut more and 10-15% that economy does better and they cut less).

Beyond March there is a huge dependence on a) the budget b) how the economy/job market evolves between now and then and c) global interest rates - and things like the US election outcome will drive some of that.

If I had to guess we will see the bank rate go from 5% now to 4% by end of 2025., and so a 4.75% fix level is probably better than the average of the bank rate over that time.

jaypers

I think they will eventually settle to around 3%. For savings, I’ve been hedging my bets a bit and shifted a fair bit of easy access money towards fixed accounts and more recently started piling into some Regular Savers, which seem to be making a huge reemergence with decent rates, 

Newbie_John

What_time_is_it said:

southone said:

The clocks go back an hour on Sunday and next week's budget is set to take us back to 1970s so without a crystal ball it's hard to tell but there is talk that this budget is likely to increase interest rates

Talk, yes. Actual evidence? Not much at all. The markets are still pricing an almost certain fall of 0.25% in November, and a strong chance of another 0.25% cut before Christmas. Lots of talk, but nobody putting money on it.

Well, we've seen how rates can shoot up due to budget annoucment (Truss), new one will be announced on 30th October, new BoE rates on 7th November - plenty of time for reaction.

One thing BoE is known of that rates only go quickly up/down if something unexpected happens (war, covid) otherwise the changes are very slow. 

What_time_is_it

Newbie_John said:

What_time_is_it said:

southone said:

The clocks go back an hour on Sunday and next week's budget is set to take us back to 1970s so without a crystal ball it's hard to tell but there is talk that this budget is likely to increase interest rates

Talk, yes. Actual evidence? Not much at all. The markets are still pricing an almost certain fall of 0.25% in November, and a strong chance of another 0.25% cut before Christmas. Lots of talk, but nobody putting money on it.

Well, we've seen how rates can shoot up due to budget annoucment (Truss), new one will be announced on 30th October, new BoE rates on 7th November - plenty of time for reaction.

One thing BoE is known of that rates only go quickly up/down if something unexpected happens (war, covid) otherwise the changes are very slow. 

Agreed.
But there are significant differences between the Truss budget and this one - The Truss budget didn't go through the OBR and wasn't "tested" in advance and, more importantly, the Truss budget didn't involve any increased investment. 
I think it's a false equivalence personally, but the proof will be in the detail of course.

njm123

I suspect Goldman Sachs will be correct and we'll see a cut at every meeting til the end of next year leaving us at 2.5% at the end of 2025.   They'll then settle  in the 2 - 3% range depending on wider geopolitics and natural disasters effect on inflation.   That assumes vested interests don't convince the rate setters that a neutral rate is closer to or even below inflation, as generally borrowing and spending is better for the economy than saving, provided the debt can be serviced,

searching4bestrates

I have no idea, but if I had to guess, I'd expect, by the end of next year, they'll be at or around a similar level to now, having fallen in the short term before rising again next year.

Again, I have no idea, but I have a feeling inflation is going to start creeping up again and there is so much uncertainty globally right now, there may be further economic "shocks".

Hope I'm wrong. 3-4% would be a "fairer" (slightly below the long term average) base rate. "Fairer" for those who entered the mortgage market since 2008 and have only ever known incredibly low interest rates.