BoE keep Base Rate at 4.75%

meanmachine_2

Inflation has crept up to 2%.

Still think the BoE will fudge it and cut to 4.5%

But I think anything below that in the shorter term is looking like wishful thinking.

and in the medium term, I'm still predicting rates going above 5%

deemy2004

meanmachine wrote:

Part of me still suspects that the Bank of England will be "encouraged" to take a relaxed view of inflation. So even if it tips over 2%, they'll probably still just argue that long-term it's on target.

Don't forget this is the same bank that hesitated to raise interest rates earlier in the year to over 5%. Had they done so, we would now be able to cut more than just a quarter of a percent.

Too little, too late, as always.

I doubt the BOE would raise rates BEFORE an election.
And after the election it became clear the economy is slowing down and inflationary pressures are still building.

The primary goal of the BOE is to controll inflation.. everythign else is secondary. With inflation in an clear uptrend, its very difficult for them to then cut rates which would result in even higher inflation.

Watch the currency markets - For a fall in the exchange rate to date from its recent peaks is EQUIVALENT to a 0.25% CUT in interest rates ! in terms of the impact on the overall domestic economy, but this is accompanied by a delayed inflationary effect that will feed through in about 9 months time..

Its 50/50 whether they will cut rates or not... since the BOE decisions are more heavily weighed by the most recent economic statistics rather than speculation on where the economy 'may' go.

meanmachine_2

deemy2004 wrote:

I doubt the BOE would raise rates BEFORE an election.
And after the election it became clear the economy is slowing down and inflationary pressures are still building.

The primary goal of the BOE is to controll inflation..

If the economy called for it, why wouldn't they raise rates just before an election?

Could it be because they're in Gordo's pocket? In which case, I would suggest their actions are more politcally motivated than they suggest.

If Gordo wants a rate cut, he'll get one. And with house prices looking vulnerable, that's exactly what he'll get.

Kenny4315

Kenny4315 wrote:

FTSE seems to be really rockin and rollin again, seems to go in spurts, then flattens for a while. After some patchy progress of late, seems to have jumped again. What's everyone's views about the year end postion of the FTSE 5600 ish ?

As I have said before I think interest rates at best will hover around this mark for some time, maybe 1/4 off but not much more, in the longer view they may even go up, given Britain's uncontrollable appetite for debt. Mr Brown et al, have too many inflationary factors that are out of there control, oil prices, oil supply, booming china, the wider world ecomony, etc.

My apologies for such an inaccurate forecast on the 11th of July 2005, of the end of year FTSE 100 position. It did go above 5600 momentarily but obviously those traders have been looking at my previous posts and wanted to annoy me by letting it slip back a bit. Although there is a few days of trading left. :snow_laug

deemy2004

You grossely understated the closing level :rotfl:

ManAtHome

More like dozenly understated...

Kenny4315

Kenny4315 wrote:

My apologies for such an inaccurate forecast on the 11th of July 2005, of the end of year FTSE 100 position. It did go above 5600 momentarily but obviously those traders have been looking at my previous posts and wanted to annoy me by letting it slip back a bit. Although there is a few days of trading left. :snow_laug

I can't believe that these traders have made my forecast look ridiculous at the last minute, I suppose 5618 was not too bad and the extra 18 points is a quite a :beer: few more beers !!! :beer: :snow_laug :snow_grin

I think that it may be a good year for the FTSE 100 next year also, confidence is fairly high both amongst traders and also now in terms of smaller investors who are moving back to the market, after 3 or 4 years away. Although many markets factors such as gas, oil, and the like are up and down the overall world economy seems to be moving in the right direction, although the UK may be held back by the previous years appeitite for debt (household). However, in terms of the market it tends to almost mirror the dow jones movements anyway so if america flies the ftse will be tracking it.

Martinslovechild

Kenny,

I agree with your comments that confidence is higher amongst traders. I don't think that confidence in equities is anywhere near where it ought to be with the public because a lot of the public are still confident about property prices which is nonsense. When house prices start falling or stagnating (2006 Q4 methinks), people will be tempted to jump back into the equity markets.

It's also interesting to note that a number of traders have said that 2005 was the first year that increases in the FTSE were not due to the consumer (unlike every other year since 1997). Certainly, a lot of companies have announced higher spending this year which should help the equity markets also.

My personal view is that the FTSE will end 2006 at 6272.

Kenny4315

Martinslovechild wrote:

Kenny,

I agree with your comments that confidence is higher amongst traders. I don't think that confidence in equities is anywhere near where it ought to be with the public because a lot of the public are still confident about property prices which is nonsense. When house prices start falling or stagnating (2006 Q4 methinks), people will be tempted to jump back into the equity markets.

It's also interesting to note that a number of traders have said that 2005 was the first year that increases in the FTSE were not due to the consumer (unlike every other year since 1997). Certainly, a lot of companies have announced higher spending this year which should help the equity markets also.

My personal view is that the FTSE will end 2006 at 6272.

Yes I agree with your comments, I think that the sheep however are starting to be tempted into the markets now. I think that the start of the new financial year may be good for share isa's as the dawning of property stagnation/losses become apparent.

It has be a good couple of days for the market. Up nearly 100 points this afternoon, from start of year. 6272, that's an interesting figure for the year end, have thought about year end a little, but not come up with figure yet. Some brokers predicted 6000+ which I thought was low, by some margin, your figure seems more realistic, that would be a gain of 9.68% approx. Without really looking in depth I think that it could go past that figure as well. I really think it will be a good year for the index, my only worry is UK consumer debt's effect, but given the FTSE is global companies US bouyance should counter this issue.

Martinslovechild

Kenny4315 wrote:

It has been a good couple of days for the market. Up nearly 100 points this afternoon, from start of year. 6272, that's an interesting figure for the year end, have thought about year end a little, but not come up with figure yet.

Kenny,

How refreshing it would be to go out for a beer with people like yourself once in a while - it bores me rigid when people ask me whether i've seen the latest instalment of I'm a Big Brother Get Me Out Of Albert Square when there's such good subject matter in the equity markets (and finance in general).

You may well be correct regarding the level of the FTSE at the end of 2006 - I've possibly under-compensated due to the level of consumer debt, but based on Next's results today, this may be a red herring - it remains to be seen how other retailers have performed, but like you say, if the US performs, then we'll naturally follow.

By the way -- an interesting statistic on the house price front -- US house prices increased by 13% last year, a lot higher than our figure which was anywhere between -4% and +4% depending on which paper you read. Therefore, given the positive sentiment in the US, the equity markets there should hopefully take off through early 2006; however, it's their current account deficit that worries me the most there and i'm not convinced that George Bush is the best man to sort it all out...