| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

We provide access to live business television and business related videos from: Bloomberg TV; The Wall Street Journal; CNBC and the Financial Times. Click image:

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax 2008

Climate Change Reports

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

News : Irish Last Updated: Apr 24, 2009 - 5:31:05 PM


Bank of Ireland revises forecast period for 2 European Central Bank rate cuts to end year 2008
By Finfacts Team
Jan 25, 2008 - 10:26:58 AM

Email this article
 Printer friendly page

Dan McLaughlin
The Bank of Ireland's Dan McLaughlin has revised his forecast period of two European Central Bank (ECB) rate cuts from the first half of 2008 to the full year.  McLaughlin had previously forecast late last year that US Federal Reserve cuts would force the ECB to cut its benchmark rate by 0.5% to 3.5% by June 2008.

“The past few months has seen a dramatic change in interest rate expectations, first in the US, then in the UK and belatedly, in the euro area”, said Dr McLaughlin, the Group Chief Economist, Bank of Ireland in his Global Markets research bulletin (access was to the Nov 07 issue at the time of posting this report) published today.

“The catalyst for this re-appraisal was a re-assessment of the economic outlook for the US and hence the global economy, with some commentators now predicting a recession in the States, rather than a further period of sub-trend growth. The housing market there has certainly deteriorated rather than stabilised and the credit crunch has prompted concerns that the banking sector, under pressure from sub-prime losses, will cut back on new lending. The labour market also appears to have weakened, having held up well for most of 2007, and any further softening could undermine the consumer. The Federal Reserve is worried, and although it believes a recession can be avoided, the scale of its concern was clearly demonstrated by the recent inter-meeting cut in rates, the 75bp reduction bringing the total fall in rates since September to 1.75%.

“The global economy has boomed in recent years, despite sub-trend US growth, but investors now fear that a full-blown US recession would have serious implications for world activity. Consequently, equity markets have tumbled, shipping rates have declined and commodity prices have started to weaken, including oil - the benchmark US crude has already declined by over 10% from its brief flirtation with $100. Indeed a move below $88.25 could signal further substantial falls, with $80 the first target.

“In fact, the near-term path of oil prices could be very significant for the economic outlook, as a fall in energy costs would boost real consumer spending in the US and hence lower the risk of two consecutive quarters of negative growth, the usual market definition of a recession. The US Government is intent on a fiscal package to boost activity, which may be supportive if timely, but the market now expects US rates to decline further, to 3% by end -January and to around 2.0% by year end. The UK market is also convinced that the Bank of England will have to embrace an aggressive easing stance and the futures market is pricing in a Bank rate of 4.5% this year, from the current 5.5%.

“This expectation, alongside other negatives for the UK economy, including increased political uncertainty, the Northern Rock debacle and a change in the tax code for non-residents, undermined sterling, which slid across the board, with the euro trading at over 76 pence at one stage. Sterling has rallied since and we expect some further gains against the euro because the market perceives a change in tack from the ECB, with euro rates now seen to be on the way down.

The Bank had talked of rate hikes but the rhetoric has shifted of late, at least for some Council Members, with more concern voiced about the outlook for growth and the need for the ECB to revise down its forecast for euro area economic activity in 2008. It was always unlikely that the ECB would raise rates against the current US backdrop, in our view, but the result of this new tone emanating from Frankfurt is that the market is now pricing in at least a half percent cut in ECB rates this year, bringing it in line with our forecast. This marked change in rate expectations has in turn weakened the euro, and we also expect it to trade lower against the US dollar and sterling in the coming months”, concluded McLaughlin.

Related Articles
Related Articles


© Copyright 2009 by Finfacts.com

Top of Page

Irish
Latest Headlines
Ryanair revises up full-year profit guidance
AIB bank profitable in third quarter
Ryanair announces half-year profits up 32% to €795m
Ryanair benefits from improved customer service
Ryanair to buy 100 new Boeing 737 MAX 200
Finfacts server migration Thursday
State-owned Allied Irish Banks reports H1 2014 profit as bad loan charges plunge
Ryanair reports profit in its financial first quarter soared 152%
UK firm opens van dealership in Dublin
Ryanair reports 8% fall in full-year profit; US services to commence in 2019
Global Financial Centres Index: New York overtakes London; Dublin slips to 66 of 83 cities
Bank of Ireland reports “significant” improvement in 2013 results
Sale process of IBRC UK projects Rock and Salt completed
CRH says 2014 will be year of profit growth after reporting 2013 loss
Ryanair reports third-quarter loss
Irish Water says it saved €100m in setup costs
RSA Insurance fires two Irish executives for large loss/ accounting irregularities
Bank of Ireland will have to raise provisions by €1.4bn; AIB says it's "well capitalised"
CRH reports slightly improved third quarter
Central Bank says ownership of Newbridge Credit Union transferred to permanent tsb
Ryanair reports H1 profits rose by 1% to €602m
Dublin Web Summit: Irish Stock Exchange and NASDAQ OMX announce dual listing plan
Irish pension managed funds returned to growth during September
Dan O’Brien resigns as economics editor of The Irish Times
Central Bank says no action required on Anglo tapes revelations
Ryanair flew 9m passengers and Aer Lingus carried 1.1m in August
UK Competition Commission says Ryanair must cut Aer Lingus stake to 5%
CRH reports H1 2013 revenue dip and loss
Vodafone refunded UK after discovery of Irish tax haven deal
RBS reports half year profit; Ulster Bank posts reduced loss
Bank of Ireland cuts pretax losses in HI 2013 to €504m
Irish State-owned Allied Irish Banks reports losses of €758m in H1 2013
Service Announcement
Irish managed pension funds declined in June
VHI reports 2012 surplus of €54.3m; Health insurance made loss
Ex- Elan director says management / board "not competent to run a business"
Aer Lingus to put €140m in employees pensions fund; Ryanair apoplectic
Wednesday Newspaper Review - Irish Business News and International Stories - - May 22, 2013
Tuesday Newspaper Review - Irish Business News and International Stories - - May 21, 2013
Ryanair, Europe’s biggest low cost carrier, announced Monday record annual profits of €569m - - up 13%