Business & Investment

The market will hit a pencil in 2021 with a 30% chance of a rate cut

A staggering £ 215 billion is in bank accounts, interest-free after the bumper year of savings … and the market estimates a 30% chance of a 30% cut in interest rates in 2021

  • 70% chance of no change in base rate / 30% chance of cut market pricing
  • Vaccine News and Brexit Trade Agreements Partially Caused Negative Rate Talk
  • Analysts say everything depends on the pandemic and economic recovery process
  • £ 215.3 billion registered for interest-free instant access accounts at the end of October

Money markets have a 30% chance of lowering interest rates next year from record lows, just as a record amount of cash in a bank account is totally interest-free.

Avoiding No-deal Brexit and deploying the Covid vaccine has so far disappeared from negative interest rates, but few expect the Bank of England to raise the base interest rate from the lowest 0.1% at any given time. next year.

In most cases, interest rates remain unchanged and market pricing is expected to remain unchanged with a 70% probability. But that leaves a 30% chance that interest rates will be reduced to the zero or negative territory.

Record Savings: Interest-Free Instant Access Accounts Have a Record £ 215 Billion

In any case, this spells yet another tragic year for the rescuer, especially for the growing army of “accidental” rescuers who find themselves having extra cash during the pandemic.

Those who were lucky enough to continue working during the crisis have seen the blockade reduce costs as they have fewer opportunities to go out for dinner and holidays.

Therefore, according to the latest figures available to the Bank of England, the interest-free instant access account had a record £ 215.3 billion at the end of October.

“This money is slowly but surely losing purchasing power,” said Wraith Karaf, a financial analyst at AJ Bell.

In 2020, more than £ 150 billion was saved in cash accounts. This includes £ 41.8 billion invested in NS & I in the calendar year through September 30th.

NS & I has raised a lot of money since the pandemic happened-despite Significantly reduce rates in huge areas of their savings In the last few months.

In 2020, more than £ 150 billion was saved in cash accounts. This includes £ 41.8 billion invested in NS & I in the calendar year through September 30th.

In 2020, more than £ 150 billion was saved in cash accounts. This includes £ 41.8 billion invested in NS & I in the calendar year through September 30th.

What's next for interest rates?The market is priced with a 30% chance that the Bank of England will cut interest rates next year

What’s next for interest rates?The market is priced with a 30% chance that the Bank of England will cut interest rates next year

“When the Bank of England lowered interest rates to an emergency level of 0.5% in 2009, no one expected interest rates to fall further after more than a decade. Ask if there is room for further. Autumn. Still, that’s exactly what we are facing, “said Carafe.

“Of course market prices can prove wrong, but there’s good reason to think the Bank of England will keep interest rates low throughout the year,” he added.

Brexit without agreement has been avoided and vaccines have begun to be rolled out nationwide, but unemployment is expected to rise sharply in the coming months, and the Bank of England “doesn’t rock the boat.”

The second Covid-19 vaccine (developed by AstraZeneca and the University of Oxford) is currently approved for use in the United Kingdom.

However, infections continue to grow, and the government yesterday announced a stricter blockade across the country. Three-quarters of the UK have been in Tier 4 since midnightThis will force more companies to close temporarily.

Pricing decisions depend on new restrictions and economic conditions after the deployment of the vaccine

Pricing decisions depend on new restrictions and economic conditions after the deployment of the vaccine

Michael Hewson, an analyst at CMC Markets UK, said the Bank of England is “unlikely” to move at negative interest rates next year, but much depends on the economic recovery.

“The vaccine deployment program, which is expected to accelerate in earnest from January 2021, will greatly affect how the global economy will develop in the coming months and whether there will be a decent recovery. It depends. ”

Tom Stevenson, Investment Director at Fidelity International, said: In early 2021.

“If the pandemic continues to brake recovery, policymakers have signaled that more monetary stimulus may be needed, but coordinated fiscal policy will also be needed.”

Khalaf added: ‘Whether MPC will plummet at a negative rate will depend heavily on the course of the pandemic and economic development in the coming months.

“The UK’s Brexit agreement has at least avoided further economic shocks that may have led the Bank of England to cut rates.”

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The market will hit a pencil in 2021 with a 30% chance of a rate cut

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