# Interest rates - market view



## WizardDr (7 Apr 2006)

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)


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## gearoidmm (7 Apr 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.


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## Howitzer (7 Apr 2006)

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.


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## WizardDr (9 Apr 2006)

I agree.. but just look at the 'staircase' of rate rises in US to see what can happen!


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## walk2dewater (10 Apr 2006)

Howitzer said:
			
		

> would be absolutely shocking to homeowners given the benign interest rate environment of the last 5 years.


 
Why would homeOWNERS care about interest rates?
[ sorry couldnt help myself]


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## legend99 (10 Apr 2006)

anyone know any web link where one could find historical Irish interest rates???


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## ClubMan (10 Apr 2006)

Interest rates 1783-1998 - Shane Whelan.
Interest rates 1999-present - ECB


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## soma (10 Apr 2006)

legend99 said:
			
		

> anyone know any web link where one could find historical Irish interest rates???


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.


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## Joanne06 (19 Apr 2006)

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.


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## tiroileain (26 Apr 2006)

_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?"_


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## Glenbhoy (27 Apr 2006)

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?


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## soma (27 Apr 2006)

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?


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.


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## demoivre (27 Apr 2006)

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.


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## beattie (27 Apr 2006)

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?


 
Still think they will wait until June. Interesting move made in China today, don't think the market expected that


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## SpatenMan (28 Apr 2006)

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.


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## power1 (28 Apr 2006)

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?


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## tyoung (28 Apr 2006)

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.


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## redo (28 Apr 2006)

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)


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.


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## Glenbhoy (1 May 2006)

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.


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## beattie (1 May 2006)

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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## dam099 (1 May 2006)

beattie said:
			
		

> 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


 
I can't see them doing this without signalling it well in advance. So far they seem to be taking a softly softly approach and if they wanted to increase by 50bp I think they would be much more likely to just do two 25bp increases close together (say one in May and one in June) rather than one large one.


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## CN624 (3 May 2006)

Doubt they have the guts (or the justification yet) for a 50 point increase.
They are still smarting from previous criticism where they failed to signal clearly their intentions to the market.


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## Howitzer (4 May 2006)

CN624 said:
			
		

> Doubt they have the guts (or the justification yet) for a 50 point increase.
> They are still smarting from previous criticism where they failed to signal clearly their intentions to the market.


 
I didn't realise there was previous criticism of any ecb failure to signal to the market their intentions. I know they are looking to be as transparent as possible but I thought the last 2 rate rises were ridiculously well flagged to anyone who'd listen.

I think there's more than enough justification to raise in May (.25%) but unfortunately Trichet appears to have jumped the gun a while back in almost certainly ruling that out.


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## whizzbang (4 May 2006)

No raise this month. Maybe next?
http://www.ecb.int/press/pr/date/2006/html/pr060504.en.html


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## redo (4 May 2006)

We shall hear from him soon; I am expecting 25 points with another 25 points depending on the european figures released next week.


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## beattie (10 May 2006)

Rises maybe not be coming to an end in the US just yet....

http://news.ft.com/cms/s/28b6bbf4-e013-11da-9e82-0000779e2340.html


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## Howitzer (22 May 2006)

Could have posted this in about a dozen threads since it'll effect just about everything. 0.5% increase in June by the looks of things.

http://www.unison.ie/irish_independent/stories.php3?ca=185&si=1618255&issue_id=14076

(free registraion required)

Why they didn't just increase by .25% in May is beyond me.


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## soma (22 May 2006)

Well my deposit accounts are really hoping for 0.50% increase..

..but I'm just not sure the ECB have the cojones to actually do it.


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## power1 (22 May 2006)

> but I'm just not sure the ECB have the cojones to actually do it


.

I agree that they wont raise it by .50 even if they would love to. France is already calling for Intervention to reduce the value of the Euro and I would imagine Germany would feel likewise. .50 would just seem a bit too aggressive for the ECB.


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## Howitzer (22 May 2006)

soma said:
			
		

> ..but I'm just not sure the ECB have the cojones to actually do it.


 
I suspect that's exactly why they may do it. Putting the foot down. But, like I said, a .25% May increase would have made a lot more sense.


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## gearoidmm (22 May 2006)

Howitzer said:
			
		

> I suspect that's exactly why they may do it. Putting the foot down. But, like I said, a .25% May increase would have made a lot more sense.



The ECB prides itself on its transparency and the put themselves in a bind with Mr Trichet's remarks before the last meeting saying that the market had overestimated the chance of a rate rise in May.

Therefore, when it came to the crunch, they couldn't raise rates without loosing face and the potential volatility as a result of that would be worse than the prospect of keeping rates as they were.


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## Howitzer (22 May 2006)

Yeah that stated aim of being transparent has really backfired on them. Now every utterance is immediately seen by the markets as being key to future rate movements, when in reality they probably don't know what the best route is until key numbers come in.


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## power1 (22 May 2006)

The ECB is still trying to fully establish its independence and authority over the European Commission and the Finance Ministers of the main eurozone economies, thats why they are so careful in signalling their intentions to the market well in advance as they don't want to do anything radical that might not work for fear they will lose credibility and give Ammunition to the likes of Thierry Breton (French Finance Minister) who has questioned the need to raise interest rates. .50 seems a very gutsy but risky move for the ECB.


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## bearishbull (22 May 2006)

power1 said:
			
		

> .
> 
> I agree that they wont raise it by .50 even if they would love to. France is already calling for Intervention to reduce the value of the Euro and I would imagine Germany would feel likewise. .50 would just seem a bit too aggressive for the ECB.


 It doesnt matter what the germans and french think ,if inflation is on the rise they will raise rates regardless of the political interference.


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## walk2dewater (22 May 2006)

Whether it's 0.5% now, or 0.25% now then 0.25% a bit later, the maths remain basically the same. The slow boiling of the heavily indebted continues.

The primary difference on June 8 will be a psychological one. If rates do go up 0.5%, the "race against rates" mentality here will go into overdrive. Property prices will spike again this summer as the fear factor kicks in.


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## soma (22 May 2006)

walk2dewater said:
			
		

> The primary difference on June 8 will be a psychological one.


Most people I know laughed-off (literally) the two 0.25% rises so far. However a 0.50% rise in one go (compounded on top of the two earlier increases) may be the first rise that is large enough to actually register on some people's radars.


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## walk2dewater (22 May 2006)

soma said:
			
		

> Most people I know laughed-off (literally) the two 0.25% rises so far. However a 0.50% rise in one go (compounded on top of the two earlier increases) may be the first rise that is large enough to actually register on some people's radars.


 
I agree.  But it still won’t to tip the market into correction mode.  We need the following to events to materialize for that to happen:

(a)   A buyers strike.  If anything, the perverse nature of the market here says that higher rates actually _causes_ buying activity.  Cf. Adamstown madness.  The fear of being left out of the party is still far greater than the fear of paying too much or incurring losses (“prices only go up” etc)
(b)   Lots of forced sellers.  The majority of current owners see zero risk in holding property assets and, I reckon, can still cover their debts obligations.  Therefore, even landlords who are subsidizing their tenants wont sell.


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## beattie (22 May 2006)

I believe that it will take more that this 50 bp increase to bring about some sort of slowdown in the increase in house prices. I think it will  take the ECB going to 3.5% before sanity prevails in the market. If there is a slowdown this could seriously focus minds of some investors who are topping up their loans every month as they will have to dig deeper into their pockets.

What is the viewpoint as to where the ECB will be at by the end of the year?


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## power1 (23 May 2006)

> What is the viewpoint as to where the ECB will be at by the end of the year?


 
June - 2.75%
September - 3.00%
December - 3.25%


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## Neffa (29 May 2006)

More evidence of increasing recovery in Germany - I wonder will this push the ECB closer to the .5% rise in June?

http://news.bbc.co.uk/1/hi/business/5026510.stm

German consumer optimism surges 


*German consumers are becoming more optimistic about the future, a report has said, boding well for a continuing recovery in Europe's largest economy. *

According to research company GfK, its consumer sentiment index rose to 6.8 in June - the highest level since 2001. 
Recently, strong export growth has pulled Germany out of a slowdown but consumer spending remained weak. That may now change as the improving economic environment and job market prompts people to shop, analysts said.


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## beattie (29 May 2006)

Well if they do go for 50bp how will that shape the outlook for ECB rates by year end, my guess would be that the ECB will be at 3.5% which IMO will be when it gets very interesting. Will investors keep piling into the market at that level when rents aren't increasing in real terms (and are decreasing outside of Dublin). If they peak (house prices) will some investors decide to bail out instead of subsidising their rental shortfalls. 
I have noticed recently on daft that some landlords in the more salubrious areas of Dublin have started to reduce rents in certain new developments which goes somewhat against the grain of their recent quarterly bulletin


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## Glenbhoy (30 May 2006)

When will the decision be made - this thursday or the following?


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## nahdoic (30 May 2006)

June 8th

http://www.finfacts.com/irelandbusinessnews/publish/article_10006011.shtml

I'd bet my house on a 25bp increase and not a 50


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## walk2dewater (30 May 2006)

http://www.rte.ie/business/2006/0530/ecb.html

the odds on 50bps just got better.


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## beattie (30 May 2006)

I suppose there are going to be two schools of thought in deciding whether it will be a 25 or 50bp point increase. The hawks such as the Germans will look at this data and point to inflationary pressures coming downstream unless some sort of preventative action is taken and the governors representing countries where the recovery is still is a nascent phase (e.g France, Italy)

The vote I would be intrigued to see is what our representative on the ECB council would vote for. Would the status quo in the property market be preferable (when we know so many jobs are hanging on this industry) or would some economic realism be better suited


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## ivuernis (30 May 2006)

Borrowing boom copperfastens interest rate hike next week:
http://www.finfacts.com/irelandbusinessnews/publish/article_10006038.shtml

"The recent instability of global equity markets makes it likely that the looming rate increase will be a quarter percent rather than a half percent. But for this turbulence, the strength of these data and an uncomfortably high inflation of 2.4 percent suggest a half percent rate increase could have been a likely outcome." - Austin Hughes (IIB Bank)


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## Guest107 (30 May 2006)

ivuernis said:
			
		

> "The recent instability of global equity markets makes it likely that the looming rate increase will be a quarter percent rather than a half percent. But for this turbulence, the strength of these data and an uncomfortably high inflation of 2.4 percent suggest a half percent rate increase could have been a likely outcome." - Austin Hughes (IIB Bank)


The recent turbulence means it will HAVE to be .5% to get noticed. Otherwise the markets will reckon the Italians are running the ECB  

50bp it is for me, thanks Austin you just made my mind up .


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## walk2dewater (30 May 2006)

2Pack said:
			
		

> The recent turbulence means it will HAVE to be .5% to get noticed. Otherwise the markets will reckon the Italians are running the ECB
> 
> 50bp it is for me, thanks Austin you just made my mind up .


 
If history is any guide CBs will prefer to avoid recession rather than fight monetary inflation for as long as possible.  They eventually lose and we end up with the worst of both worlds a slumped economy and out of control monetary inflation ("stagflation").  Maybe Trichet is different, but I doubt it.  0.5% will just roil the markets and have politicans and exporters crying out loud.  I'd say at best 35% chance its 50bps.


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## Guest107 (30 May 2006)

But an anorexic 25bps rise will spook the markets, tank the € against the $ and will cause commodity price inflation to feed thru (oil metals etc) anyway which will cause inflation to surge . The ruthless control of inflation is a test of whether the bank leans to Florence or Frankfurt . 

Now will anyone notice 25bp  in these turbulent times. They must make a loud bang this time I am sorry to say . 65%-70% likelyhood its  50bp .

You can bitchslap me if I am wrong.


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## beattie (30 May 2006)

Am I correct in saying that the ECB only has an inflation target and not a growth one?

If it is they should really be going for 50


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## gearoidmm (30 May 2006)

Look at the markets today.  most European markets down at least 1%.  ECB will be anxious not to povoke further falls in the market.  Have to agree with walk2dewater - most likely 0.25%.


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## shnaek (30 May 2006)

My money is on 50bp. Anything less and the market remains uncertain.


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## Afuera (30 May 2006)

beattie said:
			
		

> Am I correct in saying that the ECB only has an inflation target and not a growth one?
> 
> If it is they should really be going for 50



Price stability is the current main goal of the ECB.

Asset inflations, economy growth etc. are not  supposed to be considered unless they could be perceived as a threat to the higher goal of price stability.

I think it'll be a predictable .25 rise since the last thing they want to do is rock the boat too much.


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## Howitzer (30 May 2006)

.25%

Though I wonder what answer you'd get from the thousands queueing overnight this weekend for new properties.


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## whizzbang (31 May 2006)

Howitzer said:
			
		

> .25%
> 
> Though I wonder what answer you'd get from the thousands queueing overnight this weekend for new properties.



I think you would get a zombified drone of "must buy property... must get on the ladder... what is the ECB anyway?"

Apparently most home owners don't even know what their interest rate is now, let alone what it will be in a month!


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## beattie (31 May 2006)

whizzbang said:
			
		

> I think you would get a zombified drone of "must buy property... must get on the ladder... what is the ECB anyway?"
> 
> Apparently most home owners don't even know what their interest rate is now, let alone what it will be in a month!


 
Agree, I would think a large slice of buyers have no idea whatsoever the impact the ECB will have on them in the near term. If it is a 50bp increase then there might be shorter lines at these openings though not in the forseeable future IMO. There will need to be more coffee room talk of 'increasing repayments affecting social lives' etc. before it seeps through to most people.

I have a feeling this is going to get messy when I look at some of my colleagues who are in the process of purchasing at the moment as expected pay hikes won't compensate for repayment hikes


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## shnaek (31 May 2006)

Just saw on RTE business this morn:
"Preliminary figures have estimated that the annual inflation rate in the euro zone edged up further in May, to 2.5% from 2.4% in April."


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## gearoidmm (31 May 2006)

I'm only waiting for the ECB to take the lead of the Fed and stop quoting overall inflation and only talk about 'core' inflation.  that would make the figures seem much brighter.

Then they can get rid of money-supply as in indicator and we'll never need to raise interest rates again.


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## bearishbull (31 May 2006)

2 reports today, german unemployment dropped substantially in april and inflation came in ahead of forecasts, looks like interest rates *could* go higher than previously predicted.


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## beattie (31 May 2006)

Increased pressure on the ECB to go for 50bp. It would be very interesting to be a fly on the wall on Thursday week. I would be shocked if the Germans accepted anything less than 50

http://news.ft.com/cms/s/02b4951e-f08c-11da-9338-0000779e2340.html


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## daveirl (31 May 2006)

You can get 10/1 on Betfair.com on a 50bp rise, if gambling is your thing. Where can I look at what the futures markets mentioned earlier expect it to be?


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## gearoidmm (31 May 2006)

Check out www.bloomberg.com


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## shnaek (1 Jun 2006)

daveirl said:
			
		

> You can get 10/1 on Betfair.com on a 50bp rise, if gambling is your thing. Where can I look at what the futures markets mentioned earlier expect it to be?


Not any more- 7.4 now!


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## Guest107 (1 Jun 2006)

shnaek said:
			
		

> Not any more- 7.4 now!


Thats because they read my prediction and agree with me. I loaded some €€€ into betfair at for 50Bp @ 12/1 early this week as a  hedge against mortgage prices for the rest of the year ...only  , not because I gamble habitually


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## Glenbhoy (1 Jun 2006)

> not because I gamble habitually


Indeed, yet you have a betfair account   It's the only way to go in all fairness.


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## Guest107 (1 Jun 2006)

Glenbhoy said:
			
		

> Indeed, yet you have a betfair account


_Only in order to speculatively underpin my superlative judgement my dear fellow. _

I punt once a month or so and never look at the site until the idea strikes me *first* . Then I say, wonder what Betfair ?.........???

Usually I punt at odds of 8/1 or higher so breakeven is crudely once every 8 punts . At 12/1 I simply could not resist.


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## SidTheDweeb (1 Jun 2006)

It traded as high as 40.0 ... that's a value bet


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## Guest107 (1 Jun 2006)

More To Indicate 50Bp Today

Eurozone Manufacturing Is Rocking Along Despite The High Euro 

http://news.ft.com/cms/s/7042bc88-f14e-11da-940b-0000779e2340.html



> The unexpected rise in the eurozone manufacturing purchasing managers’ index, from 56.7 in April to 57.0 in May, marked the eleventh successive monthly improvement in business condition



Somebody better tell those "must get on housing ladder"  muppets though , its really time for Brian Cowan to address the nation I think !


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## Glenbhoy (1 Jun 2006)

> It traded as high as 40.0 ... that's a value bet


Time to lay and take the profit


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## Duplex (1 Jun 2006)

2Pack said:
			
		

> More To Indicate 50Bp Today
> 
> Eurozone Manufacturing Is Rocking Along Despite The High Euro
> 
> ...


 
And now, Chinese inflation. Who would have guessed, the central banks flood the world with liquidity and we get inflation; shock horror.

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=8D8E3C3F-3048-5296-A2098E054549537E


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## beattie (2 Jun 2006)

What odds now for 50bp next week?

[broken link removed]

*Euro zone inflation pressures 5yr high - report 
*Last updated: 02-06-06, 12:04 

Rising inflation in Germany and France pushed underlying price pressures in the euro zone to 5-1/2 year highs in April, according to an index published by the Economic Cycle Research Institute today. ECRI, which designs indices aimed at predicting business cycles, said its Eurozone Future Inflation Gauge (EZFIG) rose to 103.4 in April from March's 102.2.
"With the EZFIG rising to a 5-1/2 year high in its latest reading, euro zone inflation pressures are clearly in a cyclical upswing," ECRI said in a statement.
Latest official euro zone data showed annual inflation rose by a sharper-than-expected 2.5 per cent in May, while a report from the European Commission showed a strong rise in consumers' inflation expectations last month.
The European Central Bank is widely expected to raise interest rates by 25 basis points on June 8th, but the recent data have increased the probability that the bank may raise rates more aggressively, by half a percentage point.
The ECRI gauge aims to anticipate cyclical swings in the region's inflation rate and changes in official interest rate policy by measuring underlying inflationary pressures, rather than actual inflation rates.
The euro zone gauge uses a weighted average of ECRI's indices for Germany, France, Italy and Spain, whose components include measurements of bond yields, loans to individuals and businesses, raw material prices, employment and unemployment, money supply and business activity.
The German index jumped to 91.5 from 87.2 in March, whilst the French one rose to 103.5 from March's 103.1.
In contrast, the gauge for Italy dipped to 101.2 from 101.5 and the Spanish index eased to 154.3 from 159.8.
"The (German) index was pushed up by inflationary moves in measures of materials prices, money supply, orders and loans, partly offset by disinflationary moves in measures of interest rates and import prices," ECRI said.


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## Remix (2 Jun 2006)

Interest rates to be set in Dublin?



> its May 10 meeting will be hosted by the Irish central bank in Dublin


 

I think I'll be outside the central bank with a placard: " we joined the euro and all we got was a d*mn property bubble"  

[broken link removed]


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## bearishbull (2 Jun 2006)

Remix said:
			
		

> Interest rates to be set in Dublin?
> 
> 
> 
> ...


 
Our central banks could have increase reserve ratios etc and limit lending ,might be an investigation into the bank when the property bubble bursts.


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## Remix (2 Jun 2006)

bearishbull said:
			
		

> Our central banks could have increase reserve ratios etc and limit lending ,might be an investigation into the bank when the property bubble bursts.


 
You're right, blame for this "concrete and credit" economy shouldn't be pushed abroad.


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## Guest107 (2 Jun 2006)

bearishbull said:
			
		

> Our central banks could have increase reserve ratios


I Never understood why they spouted wind and piss about being 'concerned' and never upped the reserve ratios to show they were serious about it . Maybe its IFSRAs fault not the CB, dunno.

Too late now.


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## thewatcher (2 Jun 2006)

There'll be another round of tribunals al la the planning and corruption one's of the 1980's no doubt,no body will be blamed apart from a few scapegoats and the legal profession will make a fortune.

(We'll thats what my crystal ball says anyway !)


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## beattie (6 Jun 2006)

I see that Bernanke's statement last night sent shivers down the spine of the investing community as he indicated that there won't be a pause in rate hikes over there in the short term. Did anyone hear what Trichet had to say at the same meeting?


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## Remix (6 Jun 2006)

The ECB have entered their "blackout period" prior to the meeting so Trichet gave no hints on rates.

Trichet did get his blood up at the meeting though



> Trichet angrily rejected a suggestion from the audience that Italy be allowed to temporarily leave the euro-area for 18 months


 
No hints link.


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## Glenbhoy (8 Jun 2006)

So it's official - 0.25% increase. Hope those backers of 0.5% on betfair laid out when the odds tumbled!!


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## Guest107 (8 Jun 2006)

Bugger


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## ivuernis (25 Jun 2006)

Rhetoric ratchets-up risk of rate rise
http://www.finfacts.com/irelandbusinessnews/publish/article_10006298.shtml


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## walk2dewater (27 Jun 2006)

http://quote.bloomberg.com/apps/news?pid=10000006&sid=anw3R0DFPSW8&refer=home#

Garganas Says ECB May Raise Rates More Aggressively (Update1) 
June 27 (Bloomberg) -- European Central Bank council member Nicholas Garganas said the bank is ready to accelerate the pace of interest-rate increases to counter higher inflation risks in the dozen nations sharing the euro. 
``Should the need be for a more aggressive interest-rate adjustment, there is nothing to stop us from taking that decision,'' Garganas said yesterday in an interview in Basel, Switzerland. ``I would not rule out a higher adjustment to rates than 25 basis points,'' nor quickening the pace of increases from once every quarter, he said. 
The ECB has raised borrowing costs by 25 basis points every three months since early December, taking its benchmark rate to 2.75 percent on June 8. Garganas is the sixth ECB council member in as many days to signal the bank may accelerate the pace of rate increases if it sees rising inflation risks. 
``All the recent data indicate that risks to price stability are on the upside and have increased,'' said Garganas, who also heads the Central Bank of Greece. ``We have to look at them next time and see whether we have to move sooner rather than later.'' Regardless of the precise timing, ``it will be necessary to further remove monetary accommodation,'' he added. 
The euro jumped to $1.2601 at 9:48 a.m. in Frankfurt from $1.2584 before the comments were published. 
Faster Growth, Inflation 
Concern that central banks will hurt economic growth by raising rates too much has caused global stock markets to slump in the past two months. The Morgan Stanley Capital International World Index, a measure for stocks globally, has lost 9 percent since reaching a six-year high on May 9. 
Garganas said higher rates aren't damaging growth and the euro region's rate of expansion may exceed the ECB's forecasts this year and next. ``My feeling is that perhaps things will turn out to be somewhat better than projected this year and probably next year,'' he said. The bank projects growth of about 2.1 percent in 2006 and 1.8 percent in 2007. 
Faster growth is giving companies room to pass on surging energy costs and labor unions scope to demand bigger wage increases, raising the risk of sustained higher inflation. Crude oil prices reached a record of $75.35 per barrel on April 21 and traded at $71.99 today, 19 percent higher than a year ago. 
Garganas said a ``very strong increase in producer prices'' is an ``indication of some pass-through of past oil price increases.'' In May, producer-price inflation accelerated to the fastest pace in 24 years in Germany, Europe's largest economy that accounts for about a third of the euro region. 
German Confidence 
German business confidence unexpectedly rose in June, indicating the country is weathering near-record oil prices, a stronger euro and higher interest rates. The Ifo economic research institute in Munich said today that its confidence index, based on a survey of 7,000 executives, rose to 106.8 from a revised 105.7 in May. 
Euro-region consumer price inflation accelerated to 2.5 percent in May from 2.4 percent in April. The ECB, which aims to keep the rate just below 2 percent, this month to raised its forecast for 2006 to about 2.3 percent and held its 2007 estimate at about 2.2 percent. 
``If these projections materialize, then next year will mark the eighth consecutive year in which the inflation rate would be above 2 percent,'' Garganas said. ``This is not consistent with our price stability goal.'' 
`All Options Open' 
The comments echo those of fellow ECB council members Erkki Liikanen, Yves Mersch, Guy Quaden, Nout Wellink and Axel Weber, who all suggested in the past week that the bank is ready to quicken the pace of rate increases if needed. The 18-member governing council holds its next policy meeting on July 6 in Frankfurt. The following meeting on Aug. 3 is typically held by teleconference as it falls during the summer recess. 
``All the options are open at every meeting depending on the data, including the teleconference meeting,'' Garganas said. ``Should there be a need for an adjusted on Aug. 3, I don't see what could prevent us from taking such a decision.'' 
Investors have increased bets the ECB will raise rates at a faster pace. The yield on the three-month futures contract for December rose to 3.59 percent today from 3.41 percent on June 12. The contracts settle to the three-month inter-bank offered rate for the euro, which has averaged 15 basis points more than the ECB's benchmark rate since the currency's launch in 1999. 
Expectations 
The gain in the yield suggests some investors now think the bank may raise its key rate to 3.5 percent by the end of the year instead of 3.25 percent. 
The ECB held its benchmark rate at 2 percent, the lowest level for any euro-region country since World War II, for more than two years to stimulate growth, encouraging companies and consumers to borrow money. House prices in the euro region rose 7.6 percent in 2005 after a 7.2 percent increase in 2004. 
Money supply, which the ECB uses as a gauge for future inflation risks, grew the most in almost three years in April and loan growth was the fastest since the bank took charge of monetary policy in 1999. 
``Low interest rates have been the main determining factor behind this very strong trend of monetary expansion, which of course indicates risks to inflation in the medium to longer term,'' Garganas said. ``We have to continue removing monetary accommodation because of the risks involved.''


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## beattie (27 Jun 2006)

It is still pretty unlikely that they will raise again the next time the ECB convenes I would think as the market would expect more notice before a hike IMO


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## Afuera (27 Jun 2006)

More notice? I think that the six members of the ECB that have been hinting at more hikes shortly would be enough.
I'd say that it's quite probable that they will quicken up the pace of their hikes, rather than make larger incremental hikes, as it would produce less of a shock to the market.


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## walk2dewater (27 Jun 2006)

Afuera said:
			
		

> More notice? I think that the six members of the ECB that have been hinting at more hikes shortly would be enough.
> I'd say that it's quite probable that there will quicken up the pace of their hikes rather than make larger incremental hikes as this course of action would produce less of a shock to the market.


 
The ECB has been dropping more hints than Monica Lewinsky in a cigar factory. The game is changing a bit faster than I thought even a week ago.


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## Remix (27 Jun 2006)

The ISEQ financials seem oblivious to the emerging situation

Big 4 at 18.34/14.10/11.58/18.55

Time for shorts ? 

(And I don't mean Jack & Coke  )


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## cjh (27 Jun 2006)

Am I correct in saying that the ECB take July off and meet again in August?


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## cjh (27 Jun 2006)

Sorry, they do meet in July.....



A senior strategist with Ulster Bank is warning that another interest hike by the European Central Bank could happen as early as next week. 
There was a general belief among markets that Eurozone interest rates would not rise again until the European Central Bank meeting on 31st August.

But an ECB council member, who is governor of the Bank of Greece, has hinted to a Swiss newspaper that another increase of 0.25% could happen on July 6th.

[From [broken link removed]]


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## Duplex (27 Jun 2006)

German business confidence highest in 15 years, Euro-bonds fall on the news.




http://www.bloomberg.com/apps/news?pid=20602093&sid=aMB2OPQuiVfE&refer=rates


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## bearishbull (27 Jun 2006)

Either way rates seem to be heading for 3.5% by xmas? that would leave mortgage rates at 4.5% or a 50% rise in interest rates since ecb started raising the rates.


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## room305 (27 Jun 2006)

Reports on the news last night about how people are already feeling the pinch on their mortgage repayments. How will they feel if there are a further four or five raises in 2007?

To some extent it's impossible to guess future interest rates but if the economy proves resilient enough I think the ECB could go as high as 5%.


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## JumpShot (6 Jul 2006)

After ECB meeting today, Euribor futures imply 50% probability of rate rise to 4% in 2007.

Many economists traget 2% - 3% as long term nuetral real interest rate.
so looks like ECB Refi will go to 4%+ in next 18 months


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## redo (6 Jul 2006)

JumpShot said:
			
		

> After ECB meeting today, Euribor futures imply 50% probability of rate rise to 4% in 2007.
> 
> Many economists traget 2% - 3% as long term nuetral real interest rate.
> so looks like ECB Refi will go to 4%+ in next 18 months



I have to respecfully disagree with these economists.  I would have thought a neutral rate should be around 3.5% 4.0%


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## JumpShot (6 Jul 2006)

Sorry: Real interest Rate

So add on current 2.5% Eurozone inflation gets us to 4.5%


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## redo (6 Jul 2006)

JumpShot said:
			
		

> Sorry: Real interest Rate
> 
> So add on current 2.5% Eurozone inflation gets us to 4.5%


Apology accepted, Captain Neda.  (Darth Vadar voiceover)


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## Remix (6 Jul 2006)

Looks like an earlier than expected interest rate rise?

It was expected end of August but Trichet has announced that the governing council will physically meet on August 3rd rather than teleconference.


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## redo (6 Jul 2006)

Remix said:
			
		

> Looks like an earlier than expected interest rate rise?
> 
> It was expected end of August but Trichet has announced that the governing council will physically meet on August 3rd rather than teleconference.



Does 'Strong Vigilance' equate to .50% rise at the start of August?


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## Remix (6 Jul 2006)

As far as I know, the only other occasion the term 'strong vigilance' was used was back in 2005 to signal to the markets that interest rate hikes were about to begin in December.

He could simply be using it to indicate bringing the hike forward to Aug 3rd ? Or could it be more than that...


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## room305 (6 Jul 2006)

I'd say a 0.25% hike on August 3rd is most likely, with "strong vigilance" indicating there will be further hikes after this date.

The fact that the August 3rd meeting will now be a physical meeting and not just a teleconference is significant I think.


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## ivuernis (6 Sep 2006)

European Central Bank council member Axel Weber says ECB Hasn't Decided to Stop Raising Rates


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