Interest rate predictions

The MPC’s latest decision was hold and a rise looks a long way off – despite figures showing (18 October) inflation had climbed to a new high of 5.2 per cent.

Table of contents

Interest rate predictions

The MPC's latest decision was hold and a rise looks a long way off - despite figures showing (18 October) inflation had climbed to a new high of 5.2 per cent.The committee is focused on heading off a double-dip recession, believing inflation will fall next year, and therefore opted at the October meeting to restart its quantitative easing programme - an electronic form of money printing.  The October MPC minutes revealed members talked about £100billion of QE before agreeing on £75billion.The vote was 9-0 in in favour of holding rates - the same as in September and August. The vote had been locked at 7-2 for two months before that and it was 6-3 earlier this year when a rate rise looked a possibility.

Prediction on interest rate

That shift in voting reflects the remarkable and rapid movement in forecasts for rates over the summer, with predictions for the first rise, week by week, taking huge strides into the future:

  • In March/April, a rise was seen as imminent;
  • In June, the forecast was for a hike in July/August 2012;
  • By early August, futures markets earmarked early 2013 for the first increase;
  • By October, the market priced early 2014 for a rate rise.

The counter argument to low rates is that inflation - at 5.2 per cent in September (18 October), up from 4.5 per cent and way above its 2 per cent target - is a problem and should be tackled.There was a warning from the OECD that rate rises must happen in 2011 (25 May) to avoid inflation becoming 'embedded' in the economy. But the over-arching mood is that the economic recovery remains weak, making it difficult to hike the cost of borrowing.It's also worth noting that in the US, the Fed Reserve has said (9 August) it expects its key rate to remain at rock bottom (it's in a 0-0.25 per cent range) until 2013.So when will the MPC make the first move?Interest rate futures have seen a big shift in recent months. At the extremes, they pointed to an immediate rise in spring, but by early October indicated spring 2015 for the first increase.Today (1 November) they indicate the first rise to be in September or October 2014. Last month's plans for more QE had briefly combined with hopes for a euro rescue deal to marginally bring forward the chances of a rate rise - to early 2014 - but this soon reversed.These market predictions are wildly volatile - as we've constantly warned - and should be treated with caution. However, for now rate rises look like a distant prospect, despite raised concerns about inflation in the wake of QE2.

Join our Newsletter

Subscribe and get the latest updates about inheritance tax and Estate Planning into your mailbox.

We help people with over £1 million in current assets pay ZERO in UK inheritance tax

One stop comprehensive specialist advice - Tax, financial planning and legal advice service with 18 years experience.

What our clients say
Read our 118
    

"It is gratifying to finally come across an adviser who gives sensible ongoing advice which is very client focused."

Frank Hibberd

Retired gentleman

"It is nice to know that we can now be certain that our daughter will inherit our money without giving a large slice of it to the government ."

Tony & Sue Perriss

"Everyone's situation is different but having an initial discussion with Charles has really helped me personally navigate what can be a daunting subject."

Bobby Chadda

"I particularly want to thank you for the open and transparent manner in which you have serviced my tax planning needs since I first met you seven or so years ago. In arranging my tax planning through you, I have confidence"

Michael Mahon

Retired gentleman

"Charles was really helpful from the outset and quickly clarified our situation for us... I have used Bluebond for  IHT and other tax advice and they have been very helpful with both. Charles is a very experienced and knowledgeable individual and I highly recommend Bluebond's services."

Sam Attenborough

Retired gentleman

I have used Bluebond for setting up a discretionary trust for my children as well as inheritance tax and estate planning for my home and  other properties. Having searched for years, it was only after meeting and speaking with Charles that I felt confident enough to take these next steps, and I'm very glad I did. His ability to explain complex issues in simple terms and walk you through every step of the process is quite simply unparalleled.

Imran Qureshi

Excellent and comprehensive advice concerning all things financial in one place. Enthusiastic, Educational, Expert, value oriented, Professional and Polite are adjectives that come to mind as well as great attention to detail.

Deirdre Buckley

Inheritance tax is a minefield. Charles de Lastic of Bluebond Tax Planning is the best in the business at helping you to chart the path that is right for you to ensure your estate is structured in the most tax efficient manner.

Nicholas Dickinson

Charles provides clients with valuable insights that clearly demonstrate expertise built over the years. Charles and his team guided us through a estate planning journey and then addressing complex Inheritance Tax matters. They have been very transparent with their advice and cost. Overall an excellent service. Highly recommended

Shailesh Karia

The information contained in this web site is for UK consumers only.  Like most firms of solicitors and accountants, Bluebond Tax Planning is not regulated by the FCA. The content of this website does not constitute FCA regulated financial advice and all content is provided for general information purposes only. Bluebond is not responsible for any action you may take as a result of information on this site. All advice will be delivered on a personal basis once we fully understand your situation and our client agreements have been signed.

Copyright © 2024
Copyright Notice
Legal Disclaimer
Terms & Conditions
Privacy Policy