"Markets pricing in up to four interest rate hikes this year" (Sky News)

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/81934848#Comment_81934848

I'm not so sure about that - yes, inflation is a factor, especially in the index-linked vs conventional argument - but primarily the longer the duration the more sensitive gilts are to interest rate changes (logically: why buy x coupon if I can get x+ at fresh issuance) and inflation affects this by being the main driver of interest rate changes, if not in the short term, then in the longer as they know eventually interest rates will have to counter it. This is why trump mandating a lower fed rate won't help since markets know that it'll eventually cause rates to increase to deal with the fallout.

SnowMan

You can check the market's view of future interest rates in the short term from the overnight index swaps (OIS) forward short term rates.

These can be accessed from the following page, choose 'latest yield curve data' and then pick the OIS daily data current month spreadsheet, and go to the fwds short end sheet and look at the latest date (currently 20th March)

https://www.bankofengland.co.uk/statistics/yield-curves

The forward short term rates in that spreadsheet give an indication of interest rates at points in time.

The 1 month rate of 3.77% is close to current base rate of 3.75% as we would expect. The 9 month rate of 4.59% (which is 0.82% higher than 3.77%) for example indicates the market currently expects about three 0.25% increases in base rate over the rest of this calendar year.

Of course expectations and reality are likely to vary considerably depending on how events in the Gulf develop.

thunderroad88

I think a lot of the damage in terms of inflation has already been done, so even if the conflict ends within a few weeks, at least two rate rises ought to be nailed on…I’m expecting mmf and saving rates of 4.5% at least by Christmas so with a wife who is a non tax payer, we’re still ignoring gilts and holding for better easy access rates later this year without the risk

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81935041#Comment_81935041

I do not have any hard facts to prove it, but I remember reading that in recent times that the markets had not been very good at predicting interest rate movements.

flaneurs_lobster

https://forums.moneysavingexpert.com/discussion/comment/81935183#Comment_81935183

Predictions are more difficult when most of the world's economy is controlled by The Supreme Leader of the Free World's latest whim.

wmb194

https://forums.moneysavingexpert.com/discussion/comment/81935183#Comment_81935183

The thing about oil price shocks is that beyond the near term they tend to be disinflationary because they often lead to demand destruction and recessions.

Remember in 2008 when the ECB hiked into a recession and financial crisis when oil prices were rocketing? That was embarrassing. If central banks have learnt their lessons(!) they shouldn’t be too aggressive in hiking but people do have a tendency to panic.