Interest Rate Rise Imminent

th3 s1aught3r

The president of the European Central Bank has said that a rise in eurozone interest rates was "possible" at its next policy meeting in April.
The European Central bank can afford to ignore the likes of Greece and the Republic of Ireland when it sets interest rates - for the same reason that the eurozone can afford to bail them out. They're small.

http://www.bbc.co.uk/news/business-12635877

Surely this would be a disaster for our fledgling recovery, given the impact it will have on exports ?

De Dannan

th3 s1aught3r wrote: »

Surely this would be a disaster for our fledgling recovery, given the impact it will have on exports ?

Yes it would be bad for us and indeed the other countries in trouble
The rate hike will clearly be to prevent inflation in Germany more than all else

MagicSean

De Dannan wrote: »

Yes it would be bad for us and indeed the other countries in trouble
The rate hike will clearly be to prevent inflation in Germany more than all else

God I hate the Germans.

gigino

k_mac wrote: »

God I hate the Germans.

We are agreed on something k_mac. The Germans kept interest rates extra low during '03, '04, '05 etc . It suited their economy but our ecomony would not be in the state its if interest rates were higher then.

bcmf

If indeed it happens it will only confirm the notion/idea that the Euro is only about the welfare of the French and German economies.
Successive increase rate hikes could easily have the effect on either our or the weaker economies of pushing it over the edge.

Bullseye1

For me this is why the Euro doesn't work. Its great when your going on holidays but when you need to act independently to help your economy your stuck.

The ECB acknowledge that inflation is down to the oil crisis which they have no control over yet they are going to possibly raise IR to counter wages rising:rolleyes:

Bullseye1

k_mac wrote: »

God I hate the Germans.

i don't hate the Germans I just wish we could act independently from them. Their influence on the ECB along with France is just too great for the ECB to be truely independent.

gigino

Bullseye1 wrote: »

i don't hate the Germans I just wish we could act independently from them. Their influence on the ECB along with France is just too great for the ECB to be truely independent.

We are only 1% of Europe, so have no say.
If we were part of stg / our currency was linked to sterling like it was for decades, we would have a far greater percentage say. I knew this euro experiment would end up in tears. The British were right to stay out.

th3 s1aught3r

Bullseye1 wrote: »

For me this is why the Euro doesn't work. :rolleyes:

They have basically created a 2 tier Europe and I think the idea of a economic union of equals is gone

Bullseye1

gigino wrote: »

We are only 1% of Europe, so have no say.
If we were part of stg / our currency was linked to sterling like it was for decades, we would have a far greater percentage say. I knew this euro experiment would end up in tears. The British were right to stay out.

Id rather we were totally independent. The IR in the UK is pretty high at the moment and talks of rising it further. Although they do have the facility to devalue the currency which is unlikely ever to happen in the Euro as the Germans are terrified of inflation.

Saadyst

Well, Germany is playing a large part in keeping Greece / Ireland afloat at the moment - don't see how you can "hate" them for attempting to keep their recovery strong. Without them there would be a lot of places in the crapper.

It's easy to blame someone else for your own problems. The interest rate was a smaller piece of the puzzle when it came to Ireland crashing - surely we all know that by now?

kippy

Bullseye1 wrote: »

For me this is why the Euro doesn't work. Its great when your going on holidays but when you need to act independently to help your economy your stuck.

The ECB acknowledge that inflation is down to the oil crisis which they have no control over yet they are going to possibly raise IR to counter wages rising:rolleyes:

This is a bit of a mishomer.
The EU have no control over oil (raw material prices) is false. The EU or rather its member states have massive control over the prices of the finished goods at the pumps via the taxation rates they charge on the end product. We all know the percentage of tax on a litre of diesel/petrol/heating oil.

There are other ways of acting "independently" to counter these rate rises and indeed there are other instruments that countries can use to ensure the economy is kept stable during low interest periods.

The rates were always going to rise and mortgage holders in this country are in for an even bigger blow when they do.

gigino

Saadyst wrote: »

The interest rate was a smaller piece of the puzzle when it came to Ireland crashing

My point was developers etc during the tiger years could borrow money from Germany - through the Irish banks like Angle , B of I etc ) at less than 3% interest. It made sense for them to do this when development land , propertry etc was going up at 20% per year - which it did year after year after year in 2003, 2004, 2005 etc.
Now, if it cost say 8 or 10% for our property people + developers to borrow money 5, 6 and 8 years ago, our economy would be a lot different now. If the bubble was not created, property values would not have crashed so much, developers would not be defaulting on loans - and our banks would be a lot healthier.
Bl**dy germans in 03, 04 etc keeping euro interest rates low to suit their own economy.

De Dannan

Saadyst wrote: »

It's easy to blame someone else for your own problems. The interest rate was a smaller piece of the puzzle when it came to Ireland crashing - surely we all know that by now?

It will be a large part of the puzzle for our recovery

GeorgeBailey

Bullseye1 wrote: »

The IR in the UK is pretty high at the moment and talks of rising it further.

By IR I presume you mean interest rate? If so, is the UK interest rate not 0.5%? Even lower than the EU one.

Saadyst

gigino wrote: »

My point was developers etc during the tiger years could borrow money from Germany - through the Irish banks like Angle , B of I etc ) at less than 3% interest. It made sense for them to do this when development land , propertry etc was going up at 20% per year - which it did year after year after year in 2003, 2004, 2005 etc.
Now, if it cost say 8 or 10% for our property people + developers to borrow money 5, 6 and 8 years ago, our economy would be a lot different now. If the bubble was not created, property values would not have crashed so much, developers would not be defaulting on loans - and our banks would be a lot healthier.
Bl**dy germans in 03, 04 etc keeping euro interest rates low to suit their own economy.

But you are just lumping the entire blame on foreign entities - what about the government here? They had options available to them to prevent the over-heating of the economy, but they only encouraged it and fueled it further.

I think it's not as straightforward as blaming everything on the interest rate set by the ECB.

Bullseye1

kippy wrote: »

This is a bit of a mishomer.
The EU have no control over oil (raw material prices) is false. The EU or rather its member states have massive control over the prices of the finished goods at the pumps via the taxation rates they charge on the end product. We all know the percentage of tax on a litre of diesel/petrol/heating oil.

There are other ways of acting "independently" to counter these rate rises and indeed there are other instruments that countries can use to ensure the economy is kept stable during low interest periods.

The rates were always going to rise and mortgage holders in this country are in for an even bigger blow when they do.

I agree but can you see the government reduce the VAT and duty on petrol and diesel?

The ECB were likely to keep IR's lower for the time being to allow the economies within the EU to recover but are now getting windy on oil prices.

kippy

gigino wrote: »

My point was developers etc during the tiger years could borrow money from Germany - through the Irish banks like Angle , B of I etc ) at less than 3% interest. It made sense for them to do this when development land , propertry etc was going up at 20% per year - which it did year after year after year in 2003, 2004, 2005 etc.
Now, if it cost say 8 or 10% for our property people + developers to borrow money 5, 6 and 8 years ago, our economy would be a lot different now. If the bubble was not created, property values would not have crashed so much, developers would not be defaulting on loans - and our banks would be a lot healthier.
Bl**dy germans in 03, 04 etc keeping euro interest rates low to suit their own economy.

Point taken HOWEVER the irish government government and banks had, through proper regulation, the means to quell this effect but it wasnt taken.

gigino

kippy wrote: »

Point taken HOWEVER the irish government government and banks had, through proper regulation, the means to quell this effect but it wasnt taken.

Agreed. For example, section 23's etc should have been stopped in '02 or '03 at the latest - if indeed they should ever have been started at all. Instead the government continued to inflate the bubble, + build unsuitable properties in places where they were not needed by continually extending the property incentives.

kippy

Bullseye1 wrote: »

I agree but can you see the government reduce the VAT and duty on petrol and diesel?

The ECB were likely to keep IR's lower for the time being to allow the economies within the EU to recover but are now getting windy on oil prices.

I cant see it happen, but am just pointing out that there are other means of managing inflation outside of interest rates (which we have no control over).

gigino

Saadyst wrote: »

But you are just lumping the entire blame on foreign entities - what about the government here? They had options available to them to prevent the over-heating of the economy, but they only encouraged it and fueled it further.

I think it's not as straightforward as blaming everything on the interest rate set by the ECB.

I agree with you , of course the government should have done other things. It made many mistakes. I just think that low interest rates set by Europe, and the vast sums borrowed abroad by the like of Anglo which was lent for property, was a cause of our property bubble / overheated economy / crash.

I am not FF, but if other parties were in power, who is to say they would not have made the same mistakes ? In opposition they were not exactly arguing against the FF government during the boom when it decreased tax rates, increased public spending, introduced benchmarking, extended the property incentive deadlines etc. They wanted to party as much as the FF government.

ei.sdraob

Lower the corporation tax to 0%

watch them dance then

Scofflaw

gigino wrote: »

I agree with you , of course the government should have done other things. It made many mistakes. I just think that low interest rates set by Europe, and the vast sums borrowed abroad by the like of Anglo which was lent for property, was a cause of our property bubble / overheated economy / crash.

I am not FF, but if other parties were in power, who is to say they would not have made the same mistakes ? In opposition they were not exactly arguing against the FF government during the boom when it decreased tax rates, increased public spending, introduced benchmarking, extended the property incentive deadlines etc. They wanted to party as much as the FF government.

And, to be fair, our banks were actually able to borrow almost anywhere at low rates, and primarily did so outside the eurozone, as far as we have figures. It's worth remembering that the likes of Anglo had good investment grade ratings on the global markets, so their borrowing rates weren't simply set by the ECB in the first place - they could, and did, borrow on the US and UK money markets at low rates.

Also, ECB rates during the boom were not as low as they are now (1%) - they rose from 2% in 2003 to 4.25% in 2007.

cordially,
Scofflaw

heyjude

Bullseye1 wrote: »

The IR in the UK is pretty high at the moment and talks of rising it further.

The Bank of England Base Rate is currently 0.5% and has been since 2009. This represents an all-time low. Of course, this isn't necessarily reflected in the interest rates charged by the main high street banks in the UK.

th3 s1aught3r

heyjude wrote: »

The Bank of England Base Rate is currently 0.5% and has been since 2009. This represents an all-time low. Of course, this isn't necessarily reflected in the interest rates charged by the main high street banks in the UK.

At least the UK can make these decisions based soley on their own domestic needs. I would say we hardly figure in the EU interest rate decisions

bcmf

th3 s1aught3r wrote: »

I would say we hardly figure in the EU interest rate decisions

We will if(when) we start defaulting and putting the euro under pressure.

kippy

bcmf wrote: »

We will if(when) we start defaulting and putting the euro under pressure.

Yep, we will figure in their thoughts in a big way then alright.
In fairness we do figure at the moment.
Trichet said yesterday that they would be actively assisting countries whereby the interest rates are not suitable - not sure what this means but it is being factored into thinking.

bcmf

kippy wrote: »

Trichet said yesterday that they would be actively assisting countries whereby the interest rates are not suitable - not sure what this means but it is being factored into thinking.

They have to. No point in hiking up rates which effectively tightens the noose on struggling economies. It will take just one bank in the Euro to close its doors to have an 'undesirable' effect.

ardmacha

am not FF, but if other parties were in power, who is to say they would not have made the same mistakes ? In opposition they were not exactly arguing against the FF government during the boom when it decreased tax rates, increased public spending, introduced benchmarking, extended the property incentive deadlines etc. They wanted to party as much as the FF government.

No doubt other parties would have partied to some extent, but there is a difference between waking up in the morning wishing you had more than 4 hours sleep and waking up still drunk. Fiscal rectitude is a traditional FG value and Labour would not have been close to the developers. Property would have good up a bit less, negative equity would have been less, banks might have had a little capital left. There would have been a bad crisis, not a disaster.

De Dannan

kippy wrote: »

Yep, we will figure in their thoughts in a big way then alright.
In fairness we do figure at the moment.
Trichet said yesterday that they would be actively assisting countries whereby the interest rates are not suitable - not sure what this means but it is being factored into thinking.

The ECB said the other day that a rate hike was possible next time they meet, which is strong language in their terms
Who will this rate hike benefit ?

kippy

De Dannan wrote: »

The ECB said the other day that a rate hike was possible next time they meet, which is strong language in their terms
Who will this rate hike benefit ?

The economies whose inflation is heading over %3.0

gigino

ardmacha wrote: »

No doubt other parties would have partied to some extent, but there is a difference between waking up in the morning wishing you had more than 4 hours sleep and waking up still drunk. Fiscal rectitude is a traditional FG value and Labour would not have been close to the developers. Property would have good up a bit less, negative equity would have been less, banks might have had a little capital left. There would have been a bad crisis, not a disaster.

perhaps, but during the boom FG or labour were not advocating policies to slow the construction sector. FG and labour did not think continually raising public sector expenditure + social welfare + the minimum wage was a bad thing. They went along with it. They wanted to party / spend money as much as FF. Even now Labour wants to spend more money ( on social welfare, public sector etc ) than FF, even though our rates are still some of the highest in the world.

spcw

ei.sdraob wrote: »

Lower the corporation tax to 0%

thats not a bad idea if the companies taking advantage we forced to create a least 1000 jobs in ireland to take advantage of it.

bcmf

0% corpo tax......

we would prob get turfed outta europe for that alone.









Lets go for it

musho

What exports?

musho

k_mac wrote: »

God I hate the Germans.

with respect would you not think of protesting?

musho

k_mac wrote: »

God I hate the Germans.

with respect would you not think of protesting?

That why i came on here to see would anyone be willing to do the same. But sadly no and maybe no is all it would take. What you don't have you will never miss and we'll have a lot less of it in the future....

musho

k_mac wrote: »

God I hate the Germans.

with respect would you not think of protesting?

Thata why i came on here to see would anyone be willing to do the same. But no, and maybe no is all it would take.

What you don't have you will never miss and we'll have a lot less of it in the future....

later12

musho wrote: »

What exports?

Indigenous exports for 2010 are estimated at about 14 billion, Ireland has the second highest trade surplus in Europe after Germany.

Those exports.

danbohan

later10 wrote: »

Indigenous exports for 2010 are estimated at about 14 billion, Ireland has the second highest trade surplus in Europe after Germany.

Those exports.

how are we in comparison to germany on exporting people ???

later12

danbohan wrote: »

how are we in comparison to germany on exporting people ???

About as comparable to Germans in terms of wage restraint and personal excesses.

th3 s1aught3r

Just saw on Bloomberg that Greece rating has been lowered again so the EU/IMF will have to look seriously at their ability to meet their promises to pay back the bailout. I am sure its only a matter of time for Ireland too if the growth rates expected are not met

De Dannan

th3 s1aught3r wrote: »

Just saw on Bloomberg that Greece rating has been lowered again so the EU/IMF will have to look seriously at their ability to meet their promises to pay back the bailout. I am sure its only a matter of time for Ireland too if the growth rates expected are not met

I think the EU know that they have to revisit the terms of the bailouts that were inflicted on countries. The markets have even priced in defaults to the bond rates now

th3 s1aught3r

De Dannan wrote: »

I think the EU know that they have to revisit the terms of the bailouts that were inflicted on countries. The markets have even priced in defaults to the bond rates now

The Euro has been a bit stronger lately which would suggest the market is a bit more confident about the single currency despite the continuing problems of the PIGS. I also saw Tim Geithner in Berlin saying that the bailout countries need to be supported so perhaps we will see a softening of the German attitude soon

later12

De Dannan wrote: »

I think the EU know that they have to revisit the terms of the bailouts that were inflicted on countries. The markets have even priced in defaults to the bond rates now

Not so; although Irish bid yields and CDS are still up, arguably this has only happened to Greece.

RichardAnd

spcw wrote: »

thats not a bad idea if the companies taking advantage we forced to create a least 1000 jobs in ireland to take advantage of it.

Putting aside that such a suggestion wouldn't be viable, you wouldn't need to have a stipulation like that at all. With 0% on profits, we'd attract plenty of business anyway. Hypothetically, having a ruling where companies were "forced" to create jobs would just lead to superfluous jobs to benefit from more profit.

FG talk about making Ireland a great place to do business. They best way to do this is to go as capitalistic as possible and charge virtually tax on the all important profits. The less the government fiddles with corporations, the better.

th3 s1aught3r

later10 wrote: »

Not so; although Irish bid yields and CDS are still up, arguably this has only happened to Greece.

They have. The Irish rate is approaching 10%. This is a rate that has default, albeit a structured one prices in. The only reason Greece is higher is that they are deemed to be a litltle closer than us to the line

later12

th3 s1aught3r wrote: »

They have. The Irish rate is approaching 10%. This is a rate that has default,

No it is not! Absolutely not. Default rates, quite in crude nominal terms, would be at least 3% - 3.5% higher in bid yield terms.

The current Irish SG rate is about 9.5%. It may seem easy to shorthand this as 'approaching 10%' but you really should not underestimate the difference that 0.5% yield makes to fund managers in practical terms - or the difference between current market yields and what would be perceived as defaulting yields. In terms of applied investmetnts that sort of percentile difference is huge.

th3 s1aught3r

Data this week from the Irish central bank showed the number of residential mortgages in arrears had jumped by over half in 2010 and that one in 10 mortgages was either in arrears or restructured due to financial distress.

Around 80 percent of Irish residential mortgages are on variable interest rates and 50 percent track the ECB rate. Many of those loans were signed at the peak of Ireland's property boom, meaning holders are among the least able to absorb future increases.

Scofflaw

th3 s1aught3r wrote: »

Data this week from the Irish central bank showed the number of residential mortgages in arrears had jumped by over half in 2010 and that one in 10 mortgages was either in arrears or restructured due to financial distress.

Around 80 percent of Irish residential mortgages are on variable interest rates and 50 percent track the ECB rate. Many of those loans were signed at the peak of Ireland's property boom, meaning holders are among the least able to absorb future increases.

Full details are available here: http://www.financialregulator.ie/press-area/press-releases/Pages/LatestArrearsandRepossessionsFiguresshow57ofMortgageAccounts.aspx

cordially,
Scofflaw

johnnyskeleton

Bullseye1 wrote: »

Id rather we were totally independent. The IR in the UK is pretty high at the moment and talks of rising it further. Although they do have the facility to devalue the currency which is unlikely ever to happen in the Euro as the Germans are terrified of inflation.

These threads surface time and time again. Do you honestly believe that if Ireland had stayed out of the euro during a period where there was a massive movement of money from East (Japan, China, OPEC countries) to West (Europe & USA) because the Eastern countries were producing more than they spend and they needed to invest, while the West was spending more than it produced, and needed money to borrow, that Ireland alone would have remained immune to this extremely cheap money and would have followed prudent fiscal and monetary policies to prevent the bubble? Our nearest and more prudent neighbour fell foul of this too without having joined the euro.

Or do you just think that now that we've had our fun with the Euro, it is time to renege on our debts and start afresh at zero?

In many ways I blame David McWilliams for 1) telling people that the only sources of credit available to Irish banks were German banks; and 2) telling people that leaving the euro and printing a new currency until we are debt free is actually a viable proposition.