Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
SPX/Gold, Long-term Yields & Yield Curve 3 Amigos Update - 22nd Jun 18
Gold - How Long Can This Last? - 22nd Jun 18
Dow Has Fallen 8 days in a Row. Medium-long Term Bullish for Stocks - 22nd Jun 18
Trouble Spotting Market Trends? This Can Help - 22nd Jun 18
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

UK Interest Rates Cut to 5.25% - Will Not Help the Housing Market

Interest-Rates / UK Interest Rates Feb 07, 2008 - 01:59 AM GMT

By: Nadeem_Walayat

Interest-Rates Best Financial Markets Analysis ArticleThe Bank of England is expected to cut UK interest rates by a quarter point to 5.25% following on from data confirming a weakening housing market and economy. The rate cut would be inline with the Market Oracle forecast as of August 07 and Sept 07 for UK interest rates to fall to 5% by September 2008, this was revised lower to 4.75% in January 2008, following the US Panic rate cut 0.75% on 22nd Jan 08 to 3.5% which was later followed by a further 0.5% cut to 3%


UK inflation, interest rate forecast 2008

Today's anticipated rate cut will confirm the trend towards 4.75% by September 2008. The most recent RPI and CPI data also confirm their respective trends for lower inflation going forward, inline with the November 2007 forecast - UK Inflation Forecast 2008 (RPI and CPI) . The decline in inflation is due to the slowing UK economy that is however expected to avoid a recession with a target end of year growth rate of 1.3%.

UK Money Supply 2008

Moderating UK money supply growth confirms a downward bias towards forward inflation, with money supply targeting 10% by November 2008, implying an RPI Inflation rate either at or below 3%.

Interest rates, US, UK, Eurozone

The ECB - Is expected to keep interest rates on hold at 4% whilst still playing a wait and see game before taking rates lower. This despite clear evidence of economic slowdown across the euro zone as evidenced by the revision lower of the services PMI for January to 50.6 from an estimate of 52, with far sharper falls in the indices for some individual countries such as Spain. From a starting point of 4% the scope for Euro zone rate cuts is less as inflation is a higher concern at the ECB than the US Fed, which is determined to avert an recession during an US Presidential election year.

UK house price forecast 2008

UK Rate Cuts Will Not Stop House Prices From Falling

UK Interest rate cuts won't be of much help to home owners, due to the impact of the wealth effect going into reverse as house prices continue their month on month declines. For example on an average mortgage of £100k, a 0.25% cut in interest rates would result in a cut in monthly repayments of just £21. Whereas a decline in house prices of 0.5% per month results in a monthly loss of equity of £950 on an average £190,000 property. Therefore many market commentators and economists expecting a series of rate cuts to turn the UK housing market around may be surprised that the rate cuts will have very little impact on the weakening housing market, which is forecast to fall by 15% over 2 years as of August 2007 .

The impact of the interest rate cut on the UK housing market is further diminished due to the fact that mortgage lenders raised interest rates in the weeks preceding today's interest rate decision with a view to declaring a cut of 0.25% following the decision. However this means that the real cut compared to a few weeks earlier is negligible, if any at all ! (31st Jan 2008).

By Nadeem Walayat

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 120 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.


Comments

Paul T Huutchinson
11 Jan 09, 22:33
HPC

Very good, now please add Australia in your graph

Cheers, Paul T Hutchinson

Canberra Australia


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules