Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Bank of England Keeps UK Interest Rates on Hold for Final Month?

Interest-Rates / UK Interest Rates Sep 04, 2008 - 02:30 AM GMT

By: Nadeem_Walayat

Interest-Rates Best Financial Markets Analysis ArticleThe pressure is building on the Bank of England to start cutting interest rates with immediate effect as the UK economy plunges over the edge of the cliff, taking with it any hopes of a labour election victory. During the weekend Gordon Browns Darling chancellor finally showed signs of cracking-up under the strain of continually toeing Gordon Browns party line of ignoring the financial and economic fundamentals by painting a repetitively rosy picture for the British economy and financial system.


He commented: "Economic times are arguably the worst they've been in 60 years… I think it's going to be more profound and long-lasting than people thought".

All Gordon Brown could respond with was "Et tu brutus" , as his premierships final days fast resemble a shakespearean tragedy.

With the twin forces of surging inflation that has taken the CPI to a shockingly high 4.4%, and the economy in meltdown, the BOE's job is further made difficult by the panicking Brown government adopting inflationary money printing measures which are destined to see UK debt as a % of GDP soar well beyond the 40% golden rule, upwards and onwards to 60% of GDP. The consquences of which have been repeatedly warned in this column over several months that this would eventually have a severe impact on sterling, which has now finally transpired over recent weeks that have witnessed the British Pound fall by more than 11% against the US Dollar. The worst performance for sterling since it was ejected out of the European Exchange Rate Mechanism (ERM) on Black Wednesday in 1992.

My analysis during the summer months has been building towards the next forecast for UK interest rates, however the clear signs of future rate cuts have been growing literally by the week and are now crying out for a near imminent rate cut. Despite this the Bank of England remains paralysed by fear of inflation and thus will not cut rates until it sees that inflation has peaked. In that respect the BOE has the advantage as the bank sees the August inflation report today before the interest rate decision is made whilst the public will have to wait to see the inflation data for another 2 weeks, hence there exists some pssobility of surprise move depending on whether inflation has fallen for August or not.

The UK Is experiencing the perfect storm of DEFLATION as the housing bear market erodes home owner equity by several thousands of pounds every month, and INFLATION in the input and output prices surging to 20 year highs, therefore pushing the economy towards a Stagflationary recession during 2009.

The existing forecast is for UK interest rates to fall from 5.75% back in Aug / Sept 2007 to 4.75% by September 2008, that's today!

The interest rate forecast for the next 12 months will follow early next week, which will be preceded by the UK inflation forecast and followed by the UK housing market forecast for the next 2 years,.

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

One of the driving forces in determining the trend for future interest rates will be the Banks eagerness to stabalise the the housing market and thus the economy. The government has already in a desperate attempt to halt the crash in UK house prices by suspending the 1% stamp duty taxed on house purchases on properties up to a value of £175,000 for a period of 1 year. Other measures included boosting the new homes market by making available five year interest free loan of up to 30% of the value of new builds.

UK house prices for July as reported by the Halifax came in precisely on target for a fall of 1.7% on the month which now brings average house prices down from the August 07 peak by over £20,000 to the current crash in progress level of being down by 8.9%, against the existing forecast as of August 2007 for prices to fall at by an average rate of 7.5% per annum (minimum) from Aug 07 to Aug 09, as per the recent trend forecast into end 2008 as illustrated below.

The UK economy appears to be on track to meet the Market Oracle forecast of GDP growth of 1.2% for 2008, with the economy now more than ever destined to enter a recession by the start of 2009, which crushes many of the economic forecasts made by major institutions that are only now starting to make revisions, especially to overly optimistic forecasts for 2009 GDP growth of as much as 2% which was never destined to happen.

Market Oracle Track Record of Calling Monthly Interest Rate Decisions

Month Market Oracle Forecast Actual MPC Decision Outcome
Sept 08 No Change Pending
Aug 08 No Change No Change
July 08 No Change No Change
Jun 08 No Change No Change
May 08 No Change No Change
Apr 08 0.25% Cut 0.25% Cut
Mar 08 No Change No Change
Feb 08 0.25% Cut 0.25% Cut
Jan 08 No Pre-call No Change
-
Dec 07 0.25% Cut 0.25% Cut
Nov 07 No Change No Change
Oct 07 No Change No Change
Sept 07 No Pre-call No Change
-
Aug 07 No Change No Change
Jul 07 0.25% Increase 0.25% Increase
Jun 07 No Change No Change
May 07 0.25% Increase 0.25% Increase
Apr 07 No Pre-call No Change
-
Mar 07 No Pre-call No Change
-
Feb 07 0.25% Increase No Change
Jan 07 0.25% Increase 0.25% Increase
Dec 06 No Pre-call No Change
-
Nov 06 0.25% Increase 0.25% Increase
Overall Rate Forecast Accuracy
95%

 

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.


Post Comment

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

6 Critical Money Making Rules