Interest rates to be 7% by June 2011

[groucho]

I think that they will rise considerabally in the future but Imade a bet with my mate, after a few lagers, that they would be 7% by June 2011. I think they will have gone up but I think I might lose this bet.

Win or a loss for me?

[Iain328]

groucho said:

I think that they will rise considerabally in the future but Imade a bet with my mate, after a few lagers, that they would be 7% by June 2011. I think they will have gone up but I think I might lose this bet.

Win or a loss for me?

Loss. They'll go up but not that soon & not that far. 2012 is where rates might get back towards 5 or 6% IMO.

[tricky69]

yeah loss i think mate, they will be going up.... but 2011 at 7%, can't see it being that fast

the BOE have basically said that interests rates are not moveing 'significantly' for at least 12 months so think your bet is out of the question

[youngsyr]

I wouldn't worry about losing your bet too much, if the BoE rate does get that high so quickly this country will be stuffed as a lot of people are on variable rate mortgages with premiums that appear cheap now, but will be crippling at 7%.

[P-Jay]

I'd agree with that.

It's an envitable as the recession was. But given the malleting we took on this recession I don't think there will be the need for the 15% and the like we saw at the end of the last one.

[Fittster]

contango said:

What do you base your prediction on?

I assume you do not have access to view swap curves?

op said said:

...after a few lagers...

Edited by Fittster on Tuesday 10th November 22:52

[ringram]

contango said:

What do you base your prediction on?

I assume you do not have access to view swap curves?

All that is certain is that rates will not be going anywhere until job growth picks up, it would be political suicide for who ever is in power, despite an independent central bank.

Since when are swaps accurate? I seem to recal just before the crash there was little to suggest in the way of swap rates the collapse that happened. Of course the risks got priced in eventually, but it was more after the fact. Maybe its just down to the black swan effect. In any case mathematical models and markets arnt always right when describing social sciences.

[Bolebroke]

C:\Documents and Settings\Administrator\Local Settings\Temp\Bloomberg\temp\bfm627.gif

[Bolebroke]

so... UKT 6.25 11/10 trades at .714/.653 and 12/11 at 1.291 / 1.269....and 1.5yrs £ swaps at 1.47/1.49......just wondering where the 7% comes from ? How many can I trade there please ?

[ukshooter]

I expect Bank of England Base Rate to remain around 0.5% untill 2011, rising to around 2% by 2014.

Would be interesting to come back to this thread in the future to see who was the more accurate!

[b2hbm]

Hmm, depends whether you mean the BoE base rate or what's available in the markets as far as deposit-takers are concerned ? If the latter, then you might just be in with a shout although personally I think it's doubtful it will be so high.

However I'm not so sure about "0.5% for the next xx years" theory, which I suspect the pundits are taking as a marker from the Japanese economy. The self-same pundits who preach this somehow missed the "worst recession since WW2", the phrase "safe as houses" took a bit of a bashing and who'd ever have thought we'd be bailing out so many banks ?

In January VAT goes up 2.5%, the effects of last years dramatic cuts will start to move out of the 12-monthly rolling comparisons and the somewhat irrelevant RPI will start to move. It can't do anything else simply because we've just added 2.5% to every full-rated VAT item, cars, petrol, services, etc.

Ok, there will be massive pressure from good old Gordy to keep the BR low until we have an election, but by mid-year, win or lose, it will be a whole different ball-park.

[Bolebroke]

Fun as it might be to theorise....there are so many moving parts within our domestic economy - let alone the global paradigm - that nobody has any idea how our previous models will respond to new policy stimuli. Projections of 7% or 2% are entirely random and simple guesswork. Oil price inflation and VAT normalisation will have impacts on inflation...but who is to say that the BoE will not have its duty of care altered...? Old models and theories do not apply at the moment...

[scotal]

groucho said:

Imade a bet with my mate, after a few lagers,

I think alot of people on the thread are taking Groucho's pissed up bet a little seriously.

[rocksteadyeddie]

You lose.

However, if you win you will have £50 to subsidise your higher mortgage.

[AngryApples]

ukshooter said:

I expect Bank of England Base Rate to remain around 0.5% untill 2011, rising to around 2% by 2014.

Would be interesting to come back to this thread in the future to see who was the more accurate!

I'd love to think it's you mate

But 4%/2014?

[youngsyr]

AngryApples said:

ukshooter said:

I expect Bank of England Base Rate to remain around 0.5% untill 2011, rising to around 2% by 2014.

Would be interesting to come back to this thread in the future to see who was the more accurate!

I'd love to think it's you mate

But 4%/2014?

It's anyone's guess obviously, but I can see them hitting 4% before 2014, perhaps even by the back end of 2011.

If the recovery keeps on track, it's only a matter of time before inflation creeps back in. Commentators are already talking about imported inflation with the weakness of sterling and the all time high commodity prices.

Then you have the increase in VAT in the new year and the fall out of QE a bit further down the line.

I'll hedge my bets by putting my money on 3% by Q4 2011.

[Somewhatfoolish]

I predict a currency collapse and effective interbank rates of 2000000000%

[jeff m]

I'm interested in how many largers that took

20 months... I doubt there are enough meetings to reach 7% in that time frame.
Of course nothing is impossible but the FTSE would probably be around 8 for 7% to be neccessary.
If that were the case I'd be happy with 7%

[Tangent Police]

Do we need savers, both international and national to put money into banks/the country?

If we can keep house prices up by keeping interest rates down, perhaps everyone will vote for Brown?

[jeff m]

Tangent Police said:

If we can keep house prices up by keeping interest rates down, perhaps everyone will vote for Brown?

Keeping house prices up so people dip into their equity will not work so well the second time round.
(as a way to increase spending)

I'm not sure interest rates are that relavent to the UK economy, I thought inflation was controlled by taxation

Edited by jeff m on Wednesday 18th November 16:58