Interest rates - market view

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WizardDr

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ECB caught people off guard who were expecting a May interest rate rise. Trichet 'signalled' that there will be no change until June. Analysts feel that Trichet may have been wary of the rise of the Euro and that also he may be more relaxed about inflationary pressures.

The futures market is still pricing in 25 basis points move to 2.75% by June. By the end of the year, the market sees rates at 3.25%, with roughly a 66% chance of 3.50%.

(Adapted - Financial Times April 7 2006)
 
Given Trichet's remarks on vigilance the week before, it's no wonder people were surprised. There was a suggestion on Forbes that this may represent a difference of opinion between Trichet and other members of the governing council - they may be less inclined to raise rates than he seems to be.
 
Well I was very surprised. Equally surprised that the markets still give a 66% chance of a rate of 3.5% by year end. Since the ECB doesn't (I believe) meet in August this would require either a .5% increase or consecutive .25% increases at some point. This would be absolutely shocking to homeowners given the benign interest rate environment of the last 5 years.
 
I agree.. but just look at the 'staircase' of rate rises in US to see what can happen!
 
Howitzer said:
would be absolutely shocking to homeowners given the benign interest rate environment of the last 5 years.
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Why would homeOWNERS care about interest rates?
[:) sorry couldnt help myself]
 
legend99 said:
anyone know any web link where one could find historical Irish interest rates???
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Bear in mind that even if you find that data, it's fairly useless unless it also presents what the inflation rate was at the time. It's all about real (Interest R - Inflation R) rates. I think if more people realised just_how_low real rates were these days they might have a different view of their debts - instead they listen to people who are 50-60 talk about how inflation ate into their mortgages & believe it will be the same for them. :rolleyes:
 
I think interest rates are headed higher, probably come september talk will have switched to how high they will go !

There is a lot of inflation coming our way.
 
Found this amusing story when browsing elsewhere:

"Einstein dies and goes to heaven only to be informed that his room is
not yet ready. "I hope you will not mind waiting in a dormitory. We
are very sorry, but it's the best we can do and you will have to share
the room with others." he is told by the doorman (say his name is
Pete). Einstein says that this is no problem at all and that there is
no need to make such a great fuss. So Pete leads him to the dorm.
They enter and Albert is introduced to all of the present
inhabitants. "See, Here is your first room mate. He has an IQ of
180!"
"Why that's wonderful!" Says Albert. "We can discuss mathematics!"
"And here is your second room mate. His IQ is 150!"
"Why that's wonderful!" Says Albert. "We can discuss physics!"
"And here is your third room mate. His IQ is 100!"
"That's Wonderful! We can discuss the latest plays at the theater!"
Just then another man moves out to capture Albert's hand and shake it.
"I'm your last room mate and I'm sorry, but my IQ is only 80."
Albert smiles back at him and says, "So, where to you think interest
rates are headed?"
 
What's the latest interest rate synopsis - May or will they, as they most of us think wait until June before the next 0.25% increase?
How many more this year - my money is on a quarter each quarter, meaning June, Sept and Dec each to see a 0.25% increase - thoughts?
 
Glenbhoy said:
What's the latest interest rate synopsis - May or will they, as they most of us think wait until June before the next 0.25% increase?
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Two weeks ago I'd have said june, but I wonder if the recent Oil spike might encourage them to re-think a May increase.
 
Light sweet crude has softened by about 4 $ p.b. in the last few days while the euro has firmed by about 4 US cents against the buck in the last month - but of these factors should have a dampening effect on eurozone inflation.
 
Glenbhoy said:
What's the latest interest rate synopsis - May or will they, as they most of us think wait until June before the next 0.25% increase?
How many more this year - my money is on a quarter each quarter, meaning June, Sept and Dec each to see a 0.25% increase - thoughts?
Click to expand...

Still think they will wait until June. Interesting move made in China today, don't think the market expected that
 
Bear in mind the euro is almost at 7 month highs against the dollar. More exchange rate rises will take the steam out of European exports and let the ECB off the hook. The closer it gets to 1.30 the more they will begin to sweat.
 
I feel the ECB signal their intentions well in advance so there shouldn't be any real surprises this year. 0.25 in June, same in September and more than likely the same in December again. Factors to watch for:

Increasing value of Euro to Dollar - (Reduces the risk of increases)
Price of Oil (Higher it goes, the more chance of rate rises)
Any sustained rises in Inflation increases risk of rate rises (2.4% January, 2.3% February, 2.2% March)
House Price Inflation in several European Countries (Ireland, France, Spain etc) caused by excess liquidity caused by low interest rates will increase risk of rate rises.
Increasing Economic Growth and Expectations in the Major European Economies (Germany in Particular) will increase risk of rate rises.

Am I missing anything?
 
Perhaps not the right place to post but for all the central bank watchers here's a good laugh.

Columbia.edu/students/follies

It's worth a look if you can pull up the link.
 
WizardDr said:
ECB caught people off guard who were expecting a May interest rate rise. Trichet 'signalled' that there will be no change until June. Analysts feel that Trichet may have been wary of the rise of the Euro and that also he may be more relaxed about inflationary pressures.

The futures market is still pricing in 25 basis points move to 2.75% by June. By the end of the year, the market sees rates at 3.25%, with roughly a 66% chance of 3.50%.

(Adapted - Financial Times April 7 2006)
Click to expand...
I think there may be a double suprise in May. Euro inflation expected to come in around 2.4% http://www.rte.ie/business/2006/0428/eurozone.html. The ECB, over that last couple of years have been giving out signals/guarentees when to expect rate movements. They may feel the need to clip peoples wings with a rate rise in May and inject some uncertanty relavant to the present climate.
 
According to saturday's irish times, bank of america economist Holger Schmiedling reckons there's a 35% chance of a 0.5% increase by the ECB in June.
 
The FT on Saturday were also speculating that there could be a 50 basis points rise in June, I would have thought that would have caused more unease among investors than two increases of 25bp each
 
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