Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/money/article/a411409
Morning Line: Why the Bank of England has to talk down the economy
The only difference between the UK and other developed countries is that inflation has been rising, meaning rate-setters here have one more reason to be nervous.
Markets
The sun may be shining and Andy Murray may be about to be the first Brit to get to a Wimbledon final since 1938, but investors are not feeling the love.
Markets had a miserable quarter and kicked off the new quarter in an equally downbeat mood. The economic news has been worrying and fears of a double dip seem to have taken the upper hand.
The Telegraph’s Jeremy Warner said there is a risk we may be talking ourselves into a double dip by focusing on the bad news rather than the good.
Warner believes the corporate world is generally flush with cash and that is one reason for optimism.
He has a point. Yesterday’s US manufacturing data was actually quite strong. Unfortunately it was worse than some pretty ambitious forecasts. News that Spain had got its government bond away was also overlooked.
A trader friend of mine called me just to make sure I’d read the piece because he was glad to read such sense.
He too believes people have misunderstood the strength of UK companies, especially those international behemoths in the FTSE 100.
And a fixed income manager I spoke to this week thinks the recent flight to US government bonds suggests people are pricing in a picture of future misery that is just not realistic.
'We're all going to have to get used to a less rosy future but we're not going to be walking barefoot in the street,' he said.
But many of those talking up the economy do so with one important proviso; that interest rates will stay low.
Even Warner said: ‘Provided short-term interest rates remain close to zero and world demand continues to grow, that surplus should quite quickly find its way into gainful investment.’
Warner is just one in a long queue of people insisting that low interest rates are necessary. Chancellor George Osborne says so too.
Tools from Citywire Money
More about this:
More from us
- Headline inflation rate falls to 3.4% in May
- Sterling climbs on news that Bank of England rate-setter voted for rate hike
- Q&A: When will interest rates rise?
- Morning Line: Interest rates - a little pain now or a lot of pain later?
- Trio of BoE rate-setters dampen talk of interest rate hikes
- Budget hits savers as interest rates set to stay low for longer
- Bank of England holds rates at 0.5%
- Bank of England may lift interest rates soon, warns MPC member
What others are saying
- Only if we talk ourselves into it
- The British economy in International comparison
- Cable - emergency budget is balanced
- Budget slashes spending, raises VAT and taxes banks
Archive
Today's articles
- Market blog: FTSE gains momentum to break 5,400
- Homeserve under investigation by City regulator
- Snap! Greece goes and we’re awash with ‘worthless paper’
- UK inflation drops sharply to 3%
- Wonga rapped for accusing customers of fraud
- Should financial firms live by these golden rules?
- China economic picture darkening, warns Brevan Howard
- Bank of England forced to accept credit crunch probe
5 comments so far. Why not have your say?
Pramod GP
Jul 02, 2010 at 13:23
At a rare briefing at the Bank, Charles Bean, deputy governor, Spencer Dale, chief economist, and Paul Fisher, executive director for markets, clarified the Bank's position after heightened expectation that it was about to follow Sweden's lead by effectively imposing a charge on a proportion of cash that UK banks keep in its vaults.
The idea, which would further loosen monetary policy, had been gaining traction in the market since Mervyn King, the Bank's governor, said earlier this month that the Monetary Policy Committee (MPC) was "looking at" the policy when he was questioned by the Treasury Committee.
________________________________________________________
http://investmentsupport.co.uk Investment Support
report thisPramod GP
Jul 02, 2010 at 13:25
fyfuyyuyyuyuyfddgdygkhhdsdhhghjkhjk
__________________________________________________________
http://investmentsupport.co.uk
report thisAnonymous 1 needed this 'off the record'
Jul 02, 2010 at 13:30
However, the Bank's policymakers described the move as "a second order question" which was not among the MPC's immediate concerns. They pointed out that Mr King had simply answered a question put to him.
"They didn't close the door on it but they suggested nothing was imminent," said one of the economists who attended the meeting. "They told us that all these things are under review but there should be no presumption the Bank would do anything."
__________________________________________________________
[url=http://www.kingofgames.net/ben-10-games] Ben 10 Games [/url]
report thissnoekie
Jul 02, 2010 at 15:33
Whilst we have a small degree of control, it is the events outside this country that is going to adversely affect the 'upward' trend.
My belief is that we are in for a storm, albeit not as bad as the previous one. To reflect reality, rates need to increase, tick by tick.
Batten down the hatches.
report thisAnonymous 2 needed this 'off the record'
Jul 04, 2010 at 09:40
Why do we all still persist in believing what we call the recesion is something alien to our natural economic position,.
Surely the UK economy is behaving exactly as it should with a performance like ours.
report thisleave a comment
Please sign in here or register here to comment. It is free to register and only takes a minute or two.