The reason I track Nadeem's forecasts is that they are pretty spot on.Britain's house prices bull market momentum as a consequence of 5 years of ZIRP and rampant money printing is finally and rapidly starting to translate into positive economic data as illustrated by the unemployment rate tumbling to 7.6% and GDP growth rate of 0.8% for Q3, which prompted many academic economists from the Bank of England downwards to busily revise doom and gloom forecasts of in some cases just 1% GDP growth to now a high 2.5% as illustrated by Money Printing Mark Carneys latest quarterly Inflation report forecast for 2014, that in my opinion could easily exceed 3% with Inflation consequences for in excess of CPI 3% that will result in far more than mere hints of interest rate hikes that the mainstream press has been busy scrambling over these past few days to commentate on the risks of.
UK house prices as measured by the Halifax (NSA) are now rising at a rate of 8% per annum as opposed to falling at a rate of over 2% per annum when I flagged an imminent UK housing multi-year bull market over a year ago.
However, UK house prices momentum of 8% per annum whilst taking many academics by surprise lags my forecast expectations of house prices to be rising by 10% per annum for October data (19 Aug 2013 - UK House Prices Bull Market Soaring Momentum, 10% Inflation by October?). In my opinion this suggests that UK house prices will continue accelerating over the next 3 months to target an inflation rate of at least 11% per annum for January 2014 data.
UK Interest Rates Pressure Cooker
The mainstream financial press after having swallowed Bank of England Propaganda for virtually the whole of 2013 that UK Interest rates would be kept on hold until 2016 as a consequence of the Bank of England targeting a 7% Unemployment rate, are now following hints by Mark Carney that rates could rise before the end of next year and so can be seen scrambling to write reams and reams of commentary that nearly always stands at least a year behind the curve.
Whilst my expectations have remained consistent since March 2011 in expecting UK Base Interest rates to target 4.5% by the end of 2014, which is still something far beyond anything that the collective consciousness of the mainstream financial press even after Mark Carneys recent statement as warned of several months ago of what to expect would happen to the UK inflation and interest rates as the UK converged on an 7% Unemployment rate.
19 Aug 2013 - UK House Prices Bull Market Soaring Momentum, 10% Inflation by October?
Expect when UK Unemployment falls to 7% for the UK Inflation rate to have also risen to 7%.
Interest Rates to Rise Sooner than Anyone Expects?
So, according to the Bank England the next interest rate rise is at least 3 years away. Well I'll let you you into a little secret, and that is when the government or one of its institutions makes a definite statement that x is going to happen for many years, a bandwagon on which over 90% of the media jumps onboard, then there is a very high probability that the exact opposite is going to happen!
Therefore forget about 0.5% UK interest rates in 3 years time, far more probable is 4.5% interest rates by the end of NEXT year! This is not something that I've plucked out of thin air but is based on the conclusion of my long standing analysis dating back to March 2011 (08 Mar 2011 - UK Interest Rate Forecast 2011 - Conclusion and Implications - Part 2 ), I even wrote a whole ebook explaining why I expected UK interest rates would rise to 4.5% by the end of 2014. (The Interest Rate Mega-trend - FREE DOWNLOAD). Which implies significantly HIGHER mortgage interest rates than anyone expects today.
The point is that the Bank of England does NOT control interest rates, instead interest rates are controlled by the money markets. All it would take for interest rates to rise is for a relentless flow of foreign currency out of the UK. The reasons for which will become apparent with the benefit of hindsight, which I can only speculate about at this point in time, such as worsening inflation expectations, or that the flaws in the Euro-zone are fixed, or any one of a 10 other possibilities, which I am sure the academics looking in their rear view mirrors will happily write about for many years AFTER the fact!
Off course when interest rates rise by the end of next year the academics and the mass media that have swallowed the 0.5% interest rate economic propaganda hook line and sinker will all suffer collective amnesia and march on as though they had always anticipated high UK interest rates all along, as will Mark Carney at the Bank of England.
So what is missing from recent optimistic press reporting on accelerating UK GDP growth that I expect will exceed 3% for 2014, is the INFLATION consequences and that is RISING INTEREST RATES! Not hints of, but actual rate hikes far beyond anything that is being imagined today.
What many need to remember is that a 0.5% base interest rate is not NORMAL, it is a PANIC MEASURE purely to prevent the bankrupt Banking crime syndicate from imploding. Unfortunately, interest rates having been at 300 year lows for 5 years has conditioned many people into perceiving them to be the norm when they are NOT. The norm is more like 4.5% and NOT 0.5%.
He was the first a year ago to talk of boom like rises in the UK housing market, we are starting to see it now.
If he is correct in a massive jump in interest rates next year, I strongly recommend fixing now!!!
I certainly will as I have a hunch he is right, although I still find it difficult to believe that we will hit 4.5% by the end of 2014!
