Jeff Tucker on Newstalk

Heard a snippet on Newstalk at 7.00am from Mr Tucker,The gist of which two interest rate DECREASES on the horizon, house rises to start increasing very shortly and the market is already recovering.Maybe I was hearing things must listen again at 7.25am

The horizon being 2009 if I heard correctly. It seems that interest rate cuts are the panacea for all our woes, nevermind the relatively dire circumstances which might necessitate those cuts.

talking thru his hole TBH :frowning:

the next interest rate movement will be UP !

rate stays flat.

flat is not a ‘movement’ , I discounted flat 8)

O.K. we know that inflation is still on the increase - Sept above 2% and all that, M3 growth, etc, but don’t you think that the ECB will, if it suits them, ignore price stability? If we see the begining of a serious downturn in the US over the coming months do you not think this will affect EU IRs? Thanks

The ECBs only mandate is price stability. Only mandate.

The Fed has 2 mandates - price stability and low unemployment.

IMO, Trichet is simply allowing the money markets to do his job for him - increasing spreads are as good as interest rates hikes for the most part. He is still banging the upside-inflation-risk drum though, so don’t expect rate cuts any time soon Mr. Tucker.

Yes but the downside risks grow stronger each day - US downturn and EU slower growth, which could perhaps lead to EU IR decreases - no?

Yes they will reduce rates but only if inflation is contained. So for example, in a stagflationary environment I could see a significant divergence in EU and US rates as the central banks pull in opposite directions.

If the US are trying to inflate their way out of trouble - should the ECB follow them?

My gut feeling is that the world is getting pissed off with bailing out Uncle Sam - they may be left to carry the can themselves this time. You can’t avoid recessions forever, they should have taken their medicine in 2001 but they didn’t and now they’re proper crocked.

Triage is a bitch.

What do you think are the chances of stagflation in the EU and in such an event, can we be sure that the ECB would continue to increase interest rates as opposed to trying to stimulate the EU economies?

unemployment across the EU is falling . Only one of the 27 members is over 10% now, thats Slovakia.

The ageing of populations in Western europe will drive that figure lower still irrespective of any mild recession.

of course. I can’t see how the rate can go back down given all the blow ups in the credit market markets this year. The only way prices will go back up is if the banks can sell their CDOs & securitised loans onto non-German banks.

It would be nice if the mortgage loans remained on the balance sheets of BOI, AIB, TSB etc…

From now on the VI line will be the recovery is just around the corner and the market will be picking up any day now, what with all the pent up demand…

To which I might the recovery is just around the corner and over the hill and far away.

Which surely in itself would be an acknowledgement by the VIs that the market is FUBARed… no?

same line they had in April before the stamp duty changes for FTBs.

That change had a singularly galvinising effect on the market …with the benefit of hindsight .

Q2 09… that is the saying and in the higher end of the market it could well be Q3 08. This is when ecconomists, developers and estate agents are really prepping for. this is when most people believe that there will be a significant increase in demand for property.

Interest rates are generally cyclical on the way up they took a root similar to a signisodial wave patern. the frequency of increases started at once every three months, then increased to every two months and slowed to every three months again. If the ECB did their job right we are at the peek of the cycle now and it is probable that things will stay level for a period before rates start to decrease.

Rates should never have been at 2% for any period of time as this is “an emergancy level”.

If we look back last time rates went up they hit a peak for about 8 months before going down again. The reaction time on housing price inflation / deflation can slightly faster at the higher end of the price range, it is also faster when interest rates are coming down as opposed to going up. the last reaction time was about 9 months.

This is why Q2 09

I would not be sure that where we are now is the peak Brian, it may be a pause enforced by capital market turmoil which in turn removes liquidity from the banks which itself acts as a modifier just like an interest rate rise.

If capital market shenanigans end before we find ourselves in a lower inflation environment its probable that the plateau will end and that the upcycle will continue from there.

If inflation eases while at the plateau its possible , albeit marginally less than probable that some easing will take place but not much, maybe 0.5% in total.

Do remember that our current rate of 4% was considered an emergency rate by the old Bundesbank and that 5-6% was normal.

To the ECB, 2% was a bad mistake they never want to repeat .

I really don’t know what to make of your comments regarding monetary policy. You do realise that the MPC of the ECB themselves don’t know wwhere rates will be going next?

We have prospective real rate of 2% at the short end (4% less inflation target). 99% of economists would call that accommodative. 5% would be more neutral territory.

The next moves will be detemined by events. If inflation stays over 2%, monetary aggregates don’t declerate and German unemployment keeps falling we could see a pause and then renewed increases.

And tell me, as an estate agent, how ludicrously high do you think property prices can go? What exactly is it that will make the world’s most expensive houses increase in price at such a rapid pace again??