If you think that a central bank is about to raise the interest rate, how can you profit from it?

Asked by katie.jenkins

2 Answers

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Answered by Darren Smith, IFA in Basingstoke, HAMPSHIRE
You can buy derivatives (options/futures) on almost anything and any commodity.

the reality is that by the time the "man on the street" might become aware of a potential opportunity, this will be because the market is already responding to the same information. the difference is that you have almost certainly missed your opportunity.

its like trying to predict the weather, but you already know because you are actually only informing on yesterday's weather which is now known to all.

this type of trade can be extremely high risk (to match the possible reward) and certainly not for a novice investor which is not to cast aspersions on your ability but more a warning that as deserved as the victory could be, the failiure would also be yours as the transaction would be on an "execution only" basis. the trader you use will not be giving advice just taking your order.

tread carefully.

George Soros made £1bn betting against the £, but it wasnt as well covered when he lost more than that on his next "investment" | 01.26.11 @ 23:28
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$commenter.renderDisplayableName() — {comment} | 09.20.17 @ 10:53
Answered by Paul Ross DipPFS CII(MP&ER), IFA in Bourne, LINCOLNSHIRE
Darren has given quite a comprehensive answer, but what I'll add, is that I have now seen 3 of the top economists in the country in the last month and the speech from Mervyn King, the head of the BoE and they all feel that interest rates will remain low until the end of 2012. Increases in interest rates will increase inflation, and lower the house prices, which are already going down and increase business costs, thus increasing unemployment.

As a retail investor, unless your knowledge is briliant in these fields, tread very carefully as these are very hard markets to predict | 01.27.11 @ 06:01
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$commenter.renderDisplayableName() — {comment} | 09.20.17 @ 10:53
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Answered by

Darren Smith
Darren Smith, IFA in Basingstoke, HAMPSHIRE

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