Int rate cut

[submar1ney]

With the likeliehood of interest rates being cut again... what does this mean to the markets Indices, shares, currencies etc? What is the general feel? Do the markets gain confidence?

Cheers

 

[Magos]

With the likeliehood of interest rates being cut again... what does this mean to the markets Indices, shares, currencies etc? What is the general feel? Do the markets gain confidence?

Cheers

This question is more complicate than you think:

You can take two scopes,
the Macro-Economic and the Micro-Economic effects

 

[Skill Leverage]

Does anyone else get the feeling that the world's central banks need to be able to do more than just change the rates? There's so many underlying causes and effects with the state of global economies, it seems to me that trying to solve everything by cutting or raising rates is a bit like trying to sculpt ice with a sledgehammer.

 

[gooseman]

they can if they want to....

 

[Rossini]

Do you think they are likely to lower them further? I think the general consensus now is, cutting rates doesn't have the desired affect, so why bother lowering them from this point? But I totally agree with Skill L.

 

[poborsky]

The US are trying to flood the economy with money after running out of interest rate options.

 

[Skill Leverage]

It's all well and good trying to stimulate growth by dropping the rates, but there's not much difference between the banks rejecting companies for loans at 2% than there is in them being rejected at 1%.

 

[Rossini]

quite ;-)

 

[tommog]

The central banks seem to be massively behind the curve, instead of acting slightly contrarian and taking the edge off of the peaks and trophs of the economic cycle which is their role they are being lead by the economy which only ends up exacerbating any economic moves.

All central banks were guilty of hiking rates even after the economy showed signs of slowing, was it june that the ecb hiked?! Now they are losing their heads and throwing everything they can at the problem and all they are doing is artificially giving value to entities that should be worthless. They are holding a gun to peoples head forcing them to spend on products they dont need, or have little upside potential, because they make it impossible to save, my bank tried to sell me a savings account the other week, getting me 3% a year, and he said that with a straight face!

The thing is interest rates take a long time to get passed through to the real economy. By making unprecedented cuts month after month they are at a major risk of majorly over-shooting to the downside, they have no way of knowing the impact the last couple of months of cuts are having yet. By cutting too aggressively and starting to print more money they are at risk of causing inflation, which is more destructive than anything we have seen so far. But then again, its all easy with hindsight, i wouldnt want to be in their shoes

 

[poborsky]

A lot of the problems could have been avoided if the US had not cut interest rates to 1% after the dotcom bubble burst and left them there causing real estate prices to rise to ridiculous levels.

 

[Hoggums]

Also - I fear that all this will eventually lead to rampant inflation which will mean that interest rates will probably have to sky rocket in the distant future - thus prolonging the downturn.

 

[Skill Leverage]

It'll be an interesting couple of years for bonds I'd imagine.

 

[poborsky]

Agree about the inflation, possibly hyperinflation. We are entering unknown territory in the states and UK.

 

[gooseman]

looking at the trading this morning it looks liek european rates will be slashed.

 

[Hoggums]

Be interesting to see what happens to the dollar after the NFP figures if they are 700K+

 

[TomTom]

rates go up, rates go down, given the ranges and the time ratio's we should see low intrest rates for many years to come.
Low intrest rates classed in the BOE 6-1 % range.
Some people I speak with believe 7% is extreamly high.