Forecasts for ECB Interest rates

burly

Hi all,

Hope this is th ebest place to put this. i am doing a project for a course I am doing, and I need forecasts of the average interest rates and inflation for Ireland up to 2035 if possible. I have historical data up to 2014 but cant seem to find anywhere online that gives these forecasts, anyone got any ideas?

Much appreciated.

Godge

burly wrote: »

Hi all,

Hope this is th ebest place to put this. i am doing a project for a course I am doing, and I need forecasts of the average interest rates and inflation for Ireland up to 2035 if possible. I have historical data up to 2014 but cant seem to find anywhere online that gives these forecasts, anyone got any ideas?

Much appreciated.

Well, if you find an accurate prediction, let us know.

There is no way of knowing what future interest rates will be. One can make a prediction based on certain assumptions but things might change. It also depends on what you are using the information for. Are you really looking for discount rates used for CBA?

Something like this?

http://per.gov.ie/project-discount-inflation-rates/

Or one of the documents here?

http://www.environ.ie/en/Publications/DevelopmentandHousing/PPP/

burly

Godge wrote: »

Well, if you find an accurate prediction, let us know.

There is no way of knowing what future interest rates will be. One can make a prediction based on certain assumptions but things might change. It also depends on what you are using the information for. Are you really looking for discount rates used for CBA?

Something like this?

http://per.gov.ie/project-discount-inflation-rates/

Or one of the documents here?

http://www.environ.ie/en/Publications/DevelopmentandHousing/PPP/

Thanks for those. The PER ink will be particularly useful. i just need to be able to back up forecasted figures from a reliable source, such as government, ECB or central bank. (Although come to think of it, how reliable are any of those at the end of the day??!!!)

billyknowsbest

Help! How come the ECB sets a base interest rate and then economics textbooks talk about the ECB or the Fed engaging in Open Market Operations(buying and selling bonds) in order to influence the interest rate!! If the Fed or the ECB sets the interest rate why do they have to carry out OMOs?
Anybody know why a bank's reserve requirement is expressed in decimals eg 0.1 and not in percentages, is there a reason for it or is it just custom and practice?

Geuze

billyknowsbest wrote: »

Help! How come the ECB sets a base interest rate and then economics textbooks talk about the ECB or the Fed engaging in Open Market Operations(buying and selling bonds) in order to influence the interest rate!! If the Fed or the ECB sets the interest rate why do they have to carry out OMOs?
Anybody know why a bank's reserve requirement is expressed in decimals eg 0.1 and not in percentages, is there a reason for it or is it just custom and practice?

When anybody intervenes in a market, they can typically set the price or the quantity but not both.

So the Fed sets a target base rate, and then engages in whatever OMO will make that rate happen.

Example:

if I want the price of milk to be higher, say 90c, then I will have to increase demand, by buying milk.

I keep buying until my higher demand forces the price up to my target.

Geuze

burly wrote: »

Hi all,

Hope this is th ebest place to put this. i am doing a project for a course I am doing, and I need forecasts of the average interest rates and inflation for Ireland up to 2035 if possible. I have historical data up to 2014 but cant seem to find anywhere online that gives these forecasts, anyone got any ideas?

Much appreciated.

I have never heard of any serious economic analyst make predictions for inflation or interest rates that far ahead.

andrew

burly wrote: »

Hi all,

Hope this is th ebest place to put this. i am doing a project for a course I am doing, and I need forecasts of the average interest rates and inflation for Ireland up to 2035 if possible. I have historical data up to 2014 but cant seem to find anywhere online that gives these forecasts, anyone got any ideas?

Much appreciated.

Here are forecasts produced by the ECB. You won't find forecasts out to 2035, maybe 2017 max.

billyknowsbest wrote: »

Help! How come the ECB sets a base interest rate and then economics textbooks talk about the ECB or the Fed engaging in Open Market Operations(buying and selling bonds) in order to influence the interest rate!! If the Fed or the ECB sets the interest rate why do they have to carry out OMOs?
Anybody know why a bank's reserve requirement is expressed in decimals eg 0.1 and not in percentages, is there a reason for it or is it just custom and practice?

My understanding, as far as the sorta simplified model you're referring to goes, is that they 'set' the interest rate on the inter-bank market by carrying out open market operations until the rate on the market is at their target rate. They then commit to carrying out market operations which maintain the rate at that level.

In reality, it's more that they set a floor and a ceiling on the interbank market, and then the rate in the interbank market is in between, as shown in the diagram below.

ECB Rates.PNG

touts

There is little point trying to find a link between the Irish inflation rate and the ECB interest rate. You need to look at forecasts for the the inflation rate (and other economic factors such as unemployment etc) of Germany. That is the key factor in the decision making process of the ECB.

In theory the text books will tell you that the decisions of the ECB are made by looking at the needs of Europe on a whole. But in the real world for political reasons all the ECB can do is set a policy that keeps the larger economies (i.e. Germany) on track and then try to minimise the damage to other countries. That leads to imbalance in the rest of the European economies so the ECB have to engage in other activities (such as the OMOs) to keep the smaller economies from going over a cliff.

Over time the economies will start to come more in line in terms of position on the economic cycle. However as you can see in the US different states suffer/benefit more than others in the bust/boom cycle. Therefore as we move towards a federal European model the ECB will still need a range of tools beyond just setting the interest rates.

realitykeeper

burly wrote: »

Hi all,

Hope this is th ebest place to put this. i am doing a project for a course I am doing, and I need forecasts of the average interest rates and inflation for Ireland up to 2035 if possible. I have historical data up to 2014 but cant seem to find anywhere online that gives these forecasts, anyone got any ideas?

Much appreciated.

You only need it for a project so the data does not have to be right. Your lecturers will be dead by the end date and you are not betting your life savings on the outcome. You could make your own predictions based on sound theory. The theory you use would have to be in keeping with the predisposition of the person marking your work. Is he a Bolshevik or a fascist for example. I would caution against using past trends to predict the future. That would not impress I suspect.

valderrama1

It's very hard to predict interest rates in the future OP, it's literally like trying to predict the future because any number of events, political, natural or economic could influence them.

Possibly what your lecturer is looking for though is to explore different scenarios that could come about. In most scenarios rates will rise simply because they are close to zero and this is way below the historic norm.
Also ECB rates are inevitably affected by the US simply because it accounts for so much trade.

One scenario is US returns to growth and then begins to bring rates back to "normal" e.g. 3 or 4%, would the ECB follow suit? quite possibly (I don't know ).

What effect will US oil have on their interest rates? It will quite possibly bolster their economy to have their own supply of oil from the Bakken because it will basically lower their energy costs and give them more energy independence. Because the dollar is the world reserve currency and oil trades in dollars, the US interest rate is indirectly influenced by what happens in oil affairs so to speak.

What effect would an aging population have on ECB interest rates? If Europe becomes like Japan it could take a route similar to Japan's and try every Keynesian trick it can think of to stimulate the economy.

and so on..