Saturday, 14 June 2008

UK interest rates are going up

Interest rates are increasing, whether the MPC likes it or not. Since the end of January this year, the 12-month LIBOR sterling interest rates has increased 128 basis points. On June 12, the last day the BoE posted data on their website, 12 month sterling LIBOR stood at 6.42.

Inflationary expectatations are taking control of interest rates. The MPC may control overnight rates, but the market determines long term rates. At the moment, the market sees only one thing on the horizon; higher inflation.


Josh said...

That is a frightening chart. Interest rates are rising regardless of the MPC. Have they lost control?

aSteve said...

I wonder if the problem with banks being suspected of under-stating rates for the purposes of establishing the LIBOR stat have been resolved. If not, then LIBOR may still under-estimate the true cost of borrowing.

Banker said...

Rates really need to go higher globally. Yes, it will really hurt the global economy, but commodity prices are way to high and need to adjust.

Anonymous said...


Have you read Mish's articles on the Fed Uncertainty Principle. One of his points is that the Fed follows the market interest rate and then jawbones like they were the people who set it. Interesting.