Do you see a rate cut this month?

Hello
For me it seems that the market had turned around on everything they were shouting a mouth (or so) ago, and i'm referring to the US's macros.

So, i read on FF's news thread that futures indicates a 100% rate cut this month, because of the sub-prime loan problems. But i don't see anyone going in on details on this fact.

In the first place a 0.25 point rate-cut won't help so much (after my personal oppinion won't help at all individuals) and going even far with this rate cut won't create any goods at all, just think at inflation, and again, with a lower rate more bad-record-borrowers, will borrow again money, at discount levels, creating something like a spiral of loans.

In the second place, bush-administration said will try to intervenes in this problem, I don't know how, but I really think not by a rate cut announced by Bush in front of the world.

Bernanke said on every public appearance (before the sub-prime) that inflation it the problem. So, if until now inflation was the problem, by a rate cut will create even bigger inflationary pressures. On his latest interviews, he mentioned that he will try to act only when honest(and good) borrowers are affected by the sub-prime. I recently read that only 1% of AAA have difficulties paying their loans (which is a very small percentage, and not necessary related to sub-prime).

I'm waiting your reply regarding this problem.

certainly no rate cut. if anything, i think the fed should raise by another .25. ecb? probably unlikely to raise. BofE? again, they should raise by another .25 but they won't.

I have considered in investing in this news release.

However, if it is nearly 100% probably that the rate will change, the banks will start moving the dollar pairs in that direction already. All the financial reporters say that a rate change is imminent.

The spike may be trivial or nonexistant: I will watch this news release from the sidelines, and see if an investment like this is worth doing in the future.

I noticed that too, but until now i can't see a clear trend forming, although the rate cut is "known" for some days now.

If this really happens, it's intresting how market will react to the rate cut, by going long on the dollar, thinking a rate cut will relaunch US economy; or will short the dollar, seeing more rate-cuts and bad news hiting the wires?
I bet on the short-dollar side...

after today's data i'm starting too to see a rate cut:

i think a rate cut is certainly a possibly

Fed, ECB and BoE don't need to hike rates again, the money market has already done it for them a few times over.

big issue with the disparity between cash market and derivatives is that big banks hedge their cash exposures in the derivatives (swaps are following the Fed Funds)- hence if the two are moving in different directions hedging is not possible, exacerbating the problem.

Libor normally trades at 3-10 bps above base rate for overnight. maybe 15-20bps over base rate for 3 month. Last Friday GBP was at +100bps for 3 month.

That's the quivalent of 4 BoI rate hikes in August alone.

Given that most corporates borrow in 3 month paper, and most variable mortgages are based on 3 mth Libor, the 3 month Libor rate is the ACTUAL cost of borrowing, the base rate is just a benchmark.

mcp

Even if I totaly agree with you, ECB and BoE don't need a rate cut, it's important to say that Central Bank's decisions aren't made to influence the money market (exchange rates). They are made to secure future country development and economical stability, thus exchange rates are only an effect.

Rates aren't cut/hike to change the value of it's own country(ussualy). Also, the majority of volume in fx is purely speculative, in time it will fix, so if you say that market allready priced their rate decision, in time will change their position


It appears that both ECB and Boe didn't cut rate, but it is very intresting how cable and euro moved different

will the fed cave in - i hope not!

WASHINGTON (Thomson Financial) - The Federal Reserve Bank added 21 bln usd in liquidity to the banking system today in three separate repurchase agreements. Today's activity followed a 13.5 bln repurchase agreement, bringing the two-day total to 34.5 bln. Specifically, the Fed announced a 14-day 5 bln usd repo, a 7-day 11 bln usd repo, and a one-day 5 bln usd repo.

why would they cut rates, when they are pumping new money into the system.


mcp

well, i think there will be an increase, and market will react "ultra" dolar bearish...:surprised

what the hell here is one more.

ZURICH (Thomson Financial) - The Swiss National Bank (SNB) raised interest rates by 25 basis points for the 8th consecutive time since December 2005, citing recent volatility in the Swiss franc money market.

The three-month Libor rate range was raised by 0.25 percentage points to 2.25-3.25 pct, with central bank intending to keep the middle of the target range at 2.75 pct. The rate had recently climbed to as high as 2.9 pct, the SNB said.

mcp

advice to BofE: raise once more by .25
advice to fed: do NOT cut: HOLD.

good call UK

IMO whatever the fed does, it will be bad..

bad for whom

for the US dollar, stock market.. etc..

out of all the 'carry trade' currencies, the £ seems the most vulnerable IMO. especially so in G/U. if the fed cuts .50 stocks WILL rally. if it cuts .25, stocks will rally briefly and then market will ask 'so what??'. IMO, fed should HOLD, but they won't. Have a great weekend everyone

edit: due to unforeseen 'credit problems' expect a reduction in UK rates.

sterling under huge pressure, NR's shares down another 150p, ftse down 90 within an hour. expect a pullback in the ftse later on. fed might save the day tomorrow, but it's too little too late. looks like the UK economy is an even worse state than that of the USA.