Interest rates - market view

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

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

50bp it is for me, thanks Austin you just made my mind up .
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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.
 
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.
 
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
 
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%.
 
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
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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.
 
.25%

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

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