ECB rates

O

oilandvinegar

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Are there any Euronomics savvy posters out there who wouldn't mind giving an idiot's guide to what factors the ECB really cares about in relation to determining rates? A second equally vexing question to me is where the information on predicted changes in rates comes from. Any takers?

As an aside: SOME info from the indo via crashandburn at irishpropertynews.com:

"Low interest rates 'can't continue': BIS
Housing prices have rocketed at home, in the United States and other parts of Europe and Australia on the back of cheap credit.

Investors have ploughed money into riskier emerging markets and corporate debt seeking higher yields.

Rates at such low levels leave policymakers with very limited room for manoeuvre if further shocks occur. Additionally, keeping rates higher during an upturn would give them more leeway and possibly avert imbalances and bubbles, it said.

Note: Registration is free
www.unison.ie/irish_indep...issue_id=1 1068"
 
Macro economics was never my forté but Google seems to have lots of information about how interest rates (the price of money) are determined:



In relation to predictions about future market performance (in this case the money markets and the price of money) these topics are worth bearing in mind:




(There was another one about the Governor of the Bank of England's views on future rate performances but I can't locate it at the moment)
 
Governor of Bank of England

That's the one - thanks cobalt.
 
ECB and Interest Rates

Basically, the average inflation rate in the Eurozone is the main factor that determines ECB rates. The ECB prefer an Eurozone inflation rate of no more than 2%.

Other factors include consumer spending, economic growth etc.
 
ECB

Thanks guys.

Techman, what is a good source for reporting on Euro inflation trends and the other facotrs you mention?
 
thanks

Great. Thank you.

As a parting shot, any feelings on where rates are going over the next 5 years? (Please! No 'I don't have a crystal ball' disclaimers!)
 
Re: thanks

If you look at the financial pages, they should give you the long term interest rate figures, which indicate what financiars feel the direction of interest rates will be.
 
Re: thanks

> As a parting shot, any feelings on where rates are going over the next 5 years?

For what it's worth lenders have been increasing their 3-5 years fixed rates of late which may be some indication. However I don't hold with predicting/timing the market. If you are looking at this with a view to deciding whether or not to fix your mortgage repayments for example consider whether or not you really need to do so (or would if rates went up by a few percent) and not in an attempt to time the market and save money. In general you will pay a premium for a fixed rate so stay variable (tracker!) if possible assuming that your cashflow/means will allow it.
 
Rates

Thanks blank,

The position I'm in is that I'm relocating to Ireland and so I'm moderately interested in buying a house over the next couple of years. If prices soar, I'll leave, so it's not critical to mortgage my soul to buy a house there at all.

If rates rise by a point over the next year say, I reckon this will save me EUR100 or so a month assuming the market adjusts. (More if it triggers a slide.) Assumptions are dangerous I know, but I am very reluctant to buy a crappy house in Ireland when I could go elsewhere and get a nice one. I'm considering just renting and seeing how things go for a year or two. Sorry to be blunt but there it is, the average three bed semi in Ireland is horrible. ;)
 
rates

Aren't there exotic derivatives based on rates? Wouldn't the prices of these show the market's best guess on future movements?
 
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