It is always said that markets move in the direction that causes the most pain and for a year that seems to have given many fund managers a lot of pain, a dip into the year end is pouring salt into the wound. The tag team of fellow monetary policy members Mr Martin Weale and Mr Ian McCafferty were back in action again today. As Mr Weale did his bit in the Telegraph on Tuesday, Mr McCafferty was in action on Wednesday in Liverpool reiterating his views that interest rates need to be raised sooner rather than later. Both men are united in the view that wage growth is picking up and will start that feed into inflation therefore the Bank should be ahead of the curve and move now. Inflation is the only logical way to reduce the debt burden but that day may be a few years away yet. One does seem certain is that at this month's meeting there is likely to be at least 2 votes for a rate rise.
Next Wednesday we get the latest rate decision from the Federal Reserve, despite expectations of no change to interest rates after Friday's pay roll data this meeting will be one of the most eagerly anticipated for several months, and there may be some more market volatility into it in both bonds and equities.
Although as we said there is no real likelihood of a change to interest rates, the expectation may be that the accompanying message may change. The world that will be on everyone's lips will be "considerable" as it accompanies the sentence relating to the length of time before rates change. Speculation will grow into next week that word will be dropped bringing forward in many economists minds the moment when interest rates will rise in the US.
We stick firmly to the view that no matter what the rhetoric is used or how passionately Mr Weale and Mr McCafferty put the case for a rate rise interest rates are not going anywhere fast in the near future.