Are we expecting the BOE Base Rate to drop to 4% on 7th August?

LightFlare

BikingBud said:

jobbywobbler said:

I do believe they will go with a 0.25% drop in Feb, even to help out the Gov (yes meant to be impartial).    I do see 3 x 0.25 drops this year, firms will just take the NI increase - encourage more pension, reduced hrs.  

Sure public sector increases is just wooden dollars anyway.

Rates probably are best circa 3.5% long term.

Why 3.5%?

Why not 5.5%?

Why not 1.5%?

Most economic models suggest between 3-5% for a healthy economy which then trades off against inflation.

From that standpoint, we are currently right in the Goldilocks zone

Any much higher and people stop borrowing and thus spending thus causing growth to slow

Any much lower and people get drunk on cheap borrowing and cause inflation(plus the myriad of problems when rates go up as we are seing now)

The problem is that a lot of borrowers in the last 10years or so have never seen “normal” rates and believed low rates were the norm and sustainable long term - which they aren’t 

RelievedSheff

I believe the BOE will hold rates again in May.

They really have very little reason to change them at the moment.

BikingBud

LightFlare said:

BikingBud said:

jobbywobbler said:

I do believe they will go with a 0.25% drop in Feb, even to help out the Gov (yes meant to be impartial).    I do see 3 x 0.25 drops this year, firms will just take the NI increase - encourage more pension, reduced hrs.  

Sure public sector increases is just wooden dollars anyway.

Rates probably are best circa 3.5% long term.

Why 3.5%?

Why not 5.5%?

Why not 1.5%?

Most economic models suggest between 3-5% for a healthy economy which then trades off against inflation.

From that standpoint, we are currently right in the Goldilocks zone

Any much higher and people stop borrowing and thus spending thus causing growth to slow

Any much lower and people get drunk on cheap borrowing and cause inflation(plus the myriad of problems when rates go up as we are seing now)

The problem is that a lot of borrowers in the last 10years or so have never seen “normal” rates and believed low rates were the norm and sustainable long term - which they aren’t 

I agree with most of your sentiment but once a system is so far out of control, eg excessive public debt and divergent house pricing it has long since ceased to be a healthy economy, so I don't quite follow your perspective the goldilocks zone. Hence it will require significant and protracted application of remedial measures to restore the system to health. 

I feel there is much more pain to come.

ReadySteadyPop

IAMIAM said:

Surprised it was held

Did you expect them to raise? That would have been the smarter move probably, they should have just left them at 5% and stop trying to pander to people with too much debt, the global economic winds are blowing inflation, they could still be forced to start hiking again IMO.

BikingBud

Whoops! Where did the growth go?

housebuyer143

BikingBud said:

Whoops! Where did the growth go?

You mean the "growth" they were aiming for at less than inflation 😂😂 

Strummer22

housebuyer143 said:

BikingBud said:

Whoops! Where did the growth go?

You mean the "growth" they were aiming for at less than inflation 😂😂 

GDP growth targets/reporting are adjusted for inflation.

Growth less than inflation is negative growth (or shrinkage, which is a term I rather like to describe the situation!). I suspect we can expect quite a lot of it in the coming months. 

Hoenir

BikingBud said:

Whoops! Where did the growth go?

Growing economies on the back of borrowed money cannot be infinite. Covid hand-outs always had to be earnt. Never was free money. 

BikingBud

Hoenir said:

BikingBud said:

Whoops! Where did the growth go?

Growing economies on the back of borrowed money cannot be infinite. Covid hand-outs always had to be earnt. Never was free money. 

Silly me - I thought there was a little tree behind no 11!

But seriously the way the purse holders have behaved over the last 15-20 years is only to kick it all down the road. None addressed the fundamental issue our GDP is based on smoke and mirrors.

We need to get away from this farce of a "service industry" focussed economy and expecting skimmed off margins to sustain a nation. We need to get back to growing cabbages and carrots, its called produce for a reason.

IAMIAM

I definitely think its going to 4.25 in May and moving to 4 around Sept/Oct