... one in the UK, one from the ECB. On the former, David K. Smith makes a straight out prediction:
On present evidence, rates should be down to 4% next year, with the first cut perhaps in the late summer.
Smith makes the case that, in the case of the United Kingdom, what would end up being historically low peak interest rates is a sign of success for the Bank of England:
Assuming the next move is down, this will continue a sequence in which each successive interest-rate peak is lower than the one before. The Bank’s first post-independence rate peak in 1998 was 7.5%, followed by 6%, and now 4.75%...
Twelve years of low inflation and the Bank’s successful record have bought a lot of credibility. UK rates should no longer have to include a premium for previous inflation excesses; 4.75% — which would have been regarded as extraordinarily low even a few years ago — now looks too high. And perhaps the neutral rate, if not as low as the European Central Bank’s current 2% base rate, should be closer to 4%.
In the case of the euro, speculation of a potential rate cut comes from a highly-placed source (hat tip A Few Euros More):
The euro fell to a nine-month low against the dollar after European Central Bank Chief Economist Otmar Issing spurred speculation the bank may reduce interest rates for the first time since 2003.
Asked in an interview with Germany's Der Spiegel magazine whether investors' expectations of a rate cut in coming months are justified, Issing said: "In the past, financial markets almost always anticipated ECB policy decisions correctly.''
"He is preparing investors for a rate cut and the market is responding to that by selling euros and buying dollars,'' said Neil Jones, a director of foreign-exchange sales at BNP Paribas SA in London.
Global Trader's Diary contemplates the eurozone situation, wonders about the possibility of deflation (it's a trend!), and makes this prediction:
In the end I think they will cut rates (maybe this fall) and I am guessing it will happen while the euro is rising rather than falling.
If you are in the market for yet more skeptical takes on the euro's future, Mr. Smith obliges, as does Marshall Auerback at MacroMouse.