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UK, U.S. and Euro Interest Rate Trends Analysis

Interest-Rates / UK Interest Rates Jan 12, 2010 - 07:48 AM GMT

By: Nadeem_Walayat

Interest-Rates

Best Financial Markets Analysis ArticleThis analysis forms part of a series that aims resolve in an accurate UK interest rate forecast for 2010 which follows in depth analysis and forecasts for UK inflation and economy. Ensure you are subscribed to my always free newsletter to receive the final analysis and forecast in your email in box.


UK, U.S. and Euro Interest Rate Trends Analysis

The below graph shows the key interest rates for the U.K., U.S. and E.U. so as to determine any advance trend change signals for UK base interest rates during 2010.

Fed Funds - The above graph clearly shows that the U.S. Fed Funds rate usually acts as a leading indicator for U.K. interest rates both in terms of timing and in terms of trend. The current trend shows no sign of an imminent increase in the Fed Funds rate and therefore implies a UK base interest rate increase is not imminent either.

ECB - The European key interest rate trend shows a less volatile dataset then either that for the U.K. and U.S. which suggests a more cautious response to economic events, this is borne out by the tendency for European interest rate trend changes to lag both the U.S. and U.K. and therefore not particularly useful in signaling UK interest rate trend changes. However European interest rates are usually significantly below that of the UK interest rate due to less perceived risk, with a normal UK rate usually at least 1% above the European rate therefore at present would indicate a interest rate of 2% as a minimum.

In conclusion, U.S. Rate changes tend to lead UK rate changes, with UK rates usually at least at a 1% premium to either European or U.S. rates which therefore illustrates the current state of an artificial heavily subsidied banking system with no sign visible that the central banks are willing to return to a normal market at this point in time and therefore implying that the first UK interest rate hike still remains some way off.

UK Interest Rate Forecast 2009

The UK interest rate forecast of early December 2008 for 2009 forecast that UK interest rates should decline to 1% (from 3%) by early 2009 and remain there into the second half of 2009.

Forecasts for UK Inflation and Economy 2010 and Beyond

The below are the concluding forecast graphs from in depth analysis for UK inflation and economy that build towards the UK interest rate forecast for 2010 as well as the inflation mega-trends ebook. To receive the final analysis and forecast in your email in box, ensure you are subscribed to my always free newsletter.

UK Inflation Forecast for 2010

UK Economy GDP Forecast for 2010 and 2011

Source: http://www.marketoracle.co.uk/Article16437.html

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market . Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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