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"Markets pricing in up to four interest rate hikes this year" (Sky News)
The headline should really be 'three interest rate rises' rather than 'up to four' but, regardless, today's Sky news story could be relevant to anyone thinking about taking out a fixed rate savings account in the near future...
"The Iran war has seen off any prospect of interest rate cuts by the Bank of England this year.
Financial markets are now predicting up to four interest rate rises instead.
Data from the London Stock Exchange Group shows investors fully expect three hikes by December, with Bank rate set to rise almost a full percentage point to 4.71% from the current 3.75%."
Comments
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No idea who Sky News are quoting (or if they are just making it up) but Goldman Sachs don't agree
Some economists think the money markets are getting carried away by anticipating four quarter-point increases to UK interest rates this year.
Goldman Sachs, for example, have recently predicted rates will remain on hold though 2026.
They told clients on Friday:
While the inflationary concern may be less than 2022 it is growing, and the message from the Bank of England meeting this week was hawkish, and our economists now think that the MPC will remain on hold for longer and maintain Bank Rate at 3.75% throughout 2026 (versus quarterly cuts from July previously).
They see the Committee gradually normalising policy next year to reach an unchanged 3% terminal rate
although they are in a minority.
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"(Stock) Markets bounce back as Trump postpones power plant strikes after 'very good and productive' talks with Iran" - Guardian live."
"The London stock market has recovered almost all its earlier losses, after Trump also declared he had postponed any military strikes against Iranian power plants and energy infrastructure for five days."
Which may also change the expected borrowing rates. For five days, anyway …
Guardian comment: "Blimey!" Brent crude back down below $100, having been $114.
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The other day JPM had the highest prediction with 2 rises. 3 or 4 must be assuming the war goes on all year. (Which to be fair it probably will)
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This is all getting very silly. Every time Trump opens his mouth the markets zigzag, and even Trump doesn't know what he's going to say or do next.
I have enough for today. I'm off to the beach for the afternoon and I won't look at the markets till tomorrow. It can all collapse without me. 😁
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I believe this is likely to be short lived. Caveat to that is that Iran are likely to be unpredictable to anything could happen. Decided with the sudden downturn this morning to see how quickly (if at all) I could make £1,000……just for fun. Decided on Banks as it’s a sector I understand. Opened a Trading 212 account due to no fees and decided to ‘play’ with £4,000. 2 hours later and amazingly I’m £200 in profit. Lucky timing with Trump’s announcement on the talks and the sudden bounce back. Anything could happen here but Trump being Trump I suspect he will backtrack and weasel his way towards trying not to let the markets go into complete meltdown.
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Looks to me like exactly the kind of thing you'd say if you wanted to generate a spike in the markets long enough to make a quick buck.
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Cynical, but completely understandably so…markets spike today, and slowly drift back during the week. How long until those US troops get to the region? 5 days, so by next weekend? Or is it the weekend after? Enough time for one more rinse and repeat threat and taco maybe?
Or is he simply just a buffoon and not trading at all?1 -
How can anyone know - four weeks ago the war wasn't even an issue.
It might end next week - or go on for years,
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Well there are another 6 MPC meetings scheduled for this year so, 4 interest rate rises sounds entirely likely.
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No one can "know", but people can apply their judgement and the collective judgement is probably at least as good as any random individual could estimate. What the individual or collective cannot do is accurately price in the haphazard musings of a cognitively impaired politician like Trump (since we cannot know just how bad he will make things). But that's besides the point unless your criteria is to hold off any investment decisions until the outcome is perfectly known, in which case you will never make them.
That said, I find the whole "gilt yield implies BoE rate increases/decreases" narrative utterly ludicrous. The market prices gilts based on the best estimated inflationary pressures which in return are influenced by economic growth and employment issues with, to a lesser extent, the political will to address these.The BoE reducing the base rate whilst inflationary pressures are high would actually lead to an increase in gilt yields and vice versa.The BoE rate is far more reactive to the prevailing market than setting the future rates.
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