Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

UK Interest Rates on Hold as Economy heads towards Stagflation

Interest-Rates / UK Interest Rates Aug 07, 2008 - 01:02 AM GMT

By: Nadeem_Walayat

Interest-Rates Best Financial Markets Analysis ArticleThe Bank of England paralysed by fear of igniting a wage price spiral amidst surging inflation is again expected to keep UK interest rates on hold at 5% despite the UK housing market plunging off the edge of a cliff towards what will be come to be known as the UK house price crash of Summer 2008. The UK economy is fast decelerating towards a recession during mid 2009 GDP data which would normally call for rate cuts to start now, which would require surprisingly benign yet to be released inflation data for July.


UK Inflation as measured by the governments preferred measure, CPI looks set to breach the 4% level over the coming months which ensures that the Bank of England on a technical basis CANNOT CUT interest rates whilst inflation is rising. At today's MPC meeting the Bank of England members will already know what the inflation for July is as the data will not be released to the public for another week. There is a small chance that based on an horrific surge in inflation for July 08 to well beyond 4% that the Bank of England may even raise interest rates. As I say this is very unlikely but if it did occur would signal inflation jumping from June's 3.8% to something along the lines of 4.3% for July.

Similarly on the other side the chances for a cut are very low, though marginally higher than those for a rise, as a cut in UK interest rates will require no increase in July inflation over June's 3.8%.

Therefore on balance the most probable outcome today is for No change in UK interest rates.

Without pre-empting the UK interest rate forecast for 2009 which is due to be completed later this week, what I can say is that the UK does look set to head for much lower interest rates and the current inflationary surge 'should' prove temporary and start to implogde. The next cut is most likely to occur just after release of 2008 quarter 3 GDP data later this year. Watch out for the 2009 forecast in the coming days.

The UK Economy is forecast to grow by between 1% and 1.3% this year as of analysis of December 2007, which now seems highly optimistic. Still it is interesting to see that the IMF is belatedly coming around towards an more forecast more inline with the economy with just over 4 months left for 2008 by revising their forecast again lower to a 1.4% growth forecast for 2008, as against the forecast as of late 2007 of 2.3% for 2008. Therefore the IMF has cut their forecast for UK 2008 growth by 40%, and given a couple more months perhaps the forecast will be revised lower once more to 1.2% ? A seemingly totally pointless and worthless exercise for those that made business and investment decisions for 2008 towards the end of 2007.

Previous interest rate analysis / forecasts have proved remarkably accurate, and which were contrary to the consensus view at the time of their respective publication.

2008 - UK interest rates to fall to 5% by September 2008 - Aug 07, Sept 07 (revised to 4.75% - Jan 08)

2007 - UK Interest rates to peak at 5.75% by September 2007 - Dec 07

Also expect a major update to the UK house price forecast this looks set to cover next 3 years. The existing analysis / forecast as of August 2007, called for a UK house price peak in August 07, and for prices to fall at an average rate of 7.5% per annum (minimum). recent trend forecast into end 2008 is as per the below graph.

Market Oracle Track Record of Calling Monthly Interest Rate Decisions

Month
Market Oracle Forecast
Actual MPC Decision
Outcome
Aug 08
No Change
Pending
 
No Change
No Change
No Change
No Change
No Change
No Change
0.25% Cut
0.25% Cut
No Change
No Change
0.25% Cut
0.25% Cut
No Pre-call
No Change
-
0.25% Cut
0.25% Cut
No Change
No Change
No Change
No Change
No Pre-call
No Change
-
No Change
No Change
0.25% Increase
0.25% Increase
No Change
No Change
0.25% Increase
0.25% Increase
Apr 07
No Pre-call
No Change
-
Mar 07
No Pre-call
No Change
-
0.25% Increase
No Change
0.25% Increase
0.25% Increase
No Pre-call
No Change
-
0.25% Increase
0.25% Increase
Overall Rate Forecast Accuracy
94%

 

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

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 150 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

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

PHIL
24 Aug 08, 01:46
WHERE IS BROWN IN THIS

BROWN SEEMED TO BE THERE AT EVERY TURN IN CHARGE OF THE ECONOMY..NOW HE IS NOWHERE TO BE SEEN WITH NOTHING TO SAY ON THE MATTER. GIVEN FULL RESPONSIBILITY IT SEEMS HE IS DIRECTIONLESS AND SHEEPISH.PUT HIM BACK BEHIND THE TILL!


Post Comment

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

6 Critical Money Making Rules