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Why interest rates will fall regardless ?
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Helen Bess
Posted: 27 April 2024 23:35:32(UTC)
#31

Joined: 14/03/2021(UTC)
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That's an interesting perspective. Cutting rates could help support bond prices, but it might also risk fueling inflation further.
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Max Bezm
Posted: 27 April 2024 23:39:49(UTC)
#32

Joined: 18/03/2023(UTC)
Posts: 56
Helen Bess;303975 wrote:
That's an interesting perspective. Cutting rates could help support bond prices, but it might also risk fueling inflation further.

You make a fair point. Lowering interest rates could indeed boost bond prices, but it's a double-edged sword with inflation risks. Additionally, currency rates could be impacted
(it can be checked here https://rates.fm/), weakening the pound against other major currencies. The BoE will have to carefully weigh the pros and cons of such a move.
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NoMoreKickingCans
Posted: 28 April 2024 06:30:40(UTC)
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Inflation was mainly caused by the lunacy of lockdowns and furlough which cut supply and simultaneously put furlough and commuting savings into the pockets of many. Printy printy with I think 80% of the worlds dollars printed in just the last 4 years. Topped up by the Ukraine war.

Once started inflation itself became an engine of inflation. Only in the coming year should wage driven inflation fall.

The longer rates are left higher the more the economy will be held back. A small cut isn’t likely to make much difference to exchange rates and UK interest rates seem to be the highest among the major economies.

Next UK inflation number should kick down with energy prices so IMO uk will make a cut soon including under political pressure I hope/expect.
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stephen_s on 28/04/2024(UTC), Newbie on 28/04/2024(UTC), Guest on 28/04/2024(UTC)
ANDREW FOSTER
Posted: 28 April 2024 06:54:08(UTC)
#34

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I don't see much prospect of UK rates lowering any time soon.

It will lower an already stumbling pound and fuel inflation in what seems to be an already bubbling economy.

The BoE may be happy to inflate away a bit of debt. They don't care about bond holders who backed the wrong horse. That is not their concern.
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2 users thanked ANDREW FOSTER for this post.
Newbie on 28/04/2024(UTC), L.P. on 29/04/2024(UTC)
Thrugelmir
Posted: 29 April 2024 11:09:21(UTC)
#36

Joined: 01/06/2012(UTC)
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ANDREW FOSTER;303985 wrote:


It will lower an already stumbling pound and fuel inflation in what seems to be an already bubbling economy.



Consequence of a strong US $.
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L.P.
Posted: 29 April 2024 12:35:49(UTC)
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ANDREW FOSTER;303985 wrote:

I don't see much prospect of UK rates lowering any time soon.

It will lower an already stumbling pound and fuel inflation in what seems to be an already bubbling economy.

The BoE may be happy to inflate away a bit of debt. They don't care about bond holders who backed the wrong horse. That is not their concern.


You might be right Andrew though i think one or two cuts will come this year but it will be 0.25% each time and after that rates could stay put for quite some time.

Just these two cuts, albeit small, will be enough to signal once and for all that rate rises are finished which will boost the prices of bonds/gilts etc whilst reducing the cost of government borrowing as investors churn into the next cycle/recovery.
I don’t see that two 0.25% cuts will have any bearing on the economy or inflation but the effect on sentiment will be quite huge.

This scenario will also benefit a huge number of posters on this forum (including me) that invested in heavily discounted infra/reits etc as the market finally realises that they managed to get through this cycle of higher rates intact and a much more favourable risk/reward. The dividends will be sought after before yields fall/discounts close and it will be a stampede out of cash and MMF’s before the opportunity is gone.

Be prepared!

Edited.. added bit about risk/reward.
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Guest on 29/04/2024(UTC)
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