The Monetary Policy Committee kept official interest rates unchanged last week, as expected. The big determinant of when they do move will be the the labour market reaction to the end of the furlough scheme. In the meantime, soaring energy prices, rising inflation and worker shortages are continuing. The challenges to the recovery are mounting. But adults in Northern Ireland will have £100 from the High Street Voucher Scheme to soften the blow.Continue reading
The next step of lockdown easing in England will proceed as planned – non-essential retail, outdoor pubs and restaurants and hairdressers (a massive relief!) will re-open next week. While the data says that household savings pots are ready to lend a big helping hand! And with it the route out of the UK being a G7 economic laggard. As for those of us in Northern Ireland, there is no end of the dodgy haircut, or indicative dates for reopening, in sight.Continue reading
The UK has left the European Union. The transition period, during which the UK remains in both the single market and customs union, lasts until the end of the year, with trade negotiations set to start in March. In the background, the Bank of England kept Bank Rate unchanged, but lowered its forecast for the 2019 UK economy to 0.75%.Continue reading
Attacks on two oil facilities in Saudi Arabia led to a 6% reduction in global oil supply and a 15% oil price spike within days. Saudi Arabian assurances that oil production levels will return to normal within weeks have been greeted sceptically. Meanwhile the Federal Reserve lowered the Fed Funds Rate by 25 basis points following a round of monetary easing by the ECB. Bank of England decided to save its firepower for later.
Imagine taking out a mortgage and not only having to pay no interest, but actually being paid by your bank to borrow. It sounds like something from a Carlsberg ad, but it is the reality at present in Denmark, where negative interest rates are in place.
The Bank of England is more upbeat about the UK economy than three months ago, but its hands are tied by Brexit. Across the Atlantic booming employment coupled with a 50yr low in the unemployment rate looks set to keep a lid on expectations of a rate cut by the Federal Reserve.
The UK Treasury painted a downbeat picture for the UK economy in the event of a no-Brexit deal but was surpassed by an even more pessimistic prognosis from the Bank of England. Still, all major UK banks passed the latest annual stress tests assuming a worst case scenario, highlighting significantly enhanced capital positions.
The Bank of England’s latest forecasts show inflation staying above the 2% target, despite rising UK rate expectations. Prices should get a further boost from the looser fiscal policy announced in the Budget. But, as ever, all those forecasts hinge on a smooth Brexit.
As expected the BoE kept its powder dry following August’s rate hike. Meanwhile, the ECB remains on course to halt QE by year-end but tame inflation suggests a rate hike is some way off. In contrast, the Fed looks odds on to tighten policy further later this month.
The US economy is humming and wage pressures are building, keeping the Fed on track for another modest tightening in September. UK growth, however, remains lacklustre with manufacturing in the doldrums. A BoE rate hike appears a distant prospect.