Thursday, April 7, 2011

Rates to rise


Bank of England © fintag

News comments:
Interest rate predictions.

With rising inflation the new virus of 2011, interest rates are on the rise. Why rates are being put up is because this is historically what has been used to curb inflation in the past. There are other ways but this is the nasty way. Economists tell you it reduces the money supply, dampens growth, inflates currencies, reduces disposable income, that sort of thing. Of course if every country has the same inflation rate, interest rates would be the same. Well not quite but I am not here to tell you about the whys and hows of economics for I am assuming you are as clueless as I and in any event knowing how something is supposed to work doesn't mean it will work the way you believe it will.

History will show that the antics of the ECB, BoE and Fed over the past few years were reckless. Things should be allowed to go bust and by putting rates so low after the credit crunch and ignoring bad debts hoping they would go away was madness. We have a few people controlling our destinies. Will the 1970s repeat themselves or will it be the 1930s all over? Or will raising rates have the effect of savings going up and obesity going down? Who knows.

Whatever the upshot, there is a lot of anxiety out there. Depression is on the increase (pa) / (bbc).

The Bank of England and ECB are itching to put up rates. Politicians are not so keen, especially in the PIG countries where every basis point means the cost of borrowing increases. (guardian)

So we have a few experts telling us rates are going up in the next few days (unless you live in China where this is becoming a common occurrence).

My prediction is the Bank of England and the ECB will rise rates by a pathetic 25bips.

Today's shorts:
Bloomberg thinks King will continue to stare into the headlights (bloomberg)

Today's longs:
ECB is going to raise rates until the PIGS squeal and die (bloomberg)

UK banks tier capital to be destroyed by bomber Moody (reuters)

Gold and oil reach new highs (reuters)

Lone man predicts BoE will raise rates (telegraph)

Rates to rise.