Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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

© 2005-2022 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