Is inflation a threat to the UK recovery?
This week sees a number of vital economic statistics in the UK with concerns that the rate of inflation is set to spike upwards in the early part of 2010. Recent figures have shown an increase in the cost of raw materials, much of which came from the upward movement in the price of oil, which will have an impact upon inflation. So what else do we need to monitor in the short term?
There is also concern that the government's refusal to maintain VAT at 15%, and instead return it to 17.5%, will also place further upward pressure on the cost of living in the UK. In what is becoming a more difficult scenario by the day, the Bank of England is also under pressure because of the strategy regarding UK base rates which have remained at 0.5% for some time. If inflation does begin to take off, and the Bank of England does not respond quickly enough, we could move towards a situation where the rate of inflation spirals out of control and we need to see a significant increase in base rates in a very short space of time.
The ability to increase base rates and make borrowing more expensive is a very basic tool in the economic UK government's toolbox but one which has proven very effective over the years.
Mutual societies under pressure on debt downgrade
The credit rating agency Fitch has confirmed that the debts of the Nationwide building society, the largest mutual in the UK, has been downgraded from stable to negative due to the pressure placed upon the Nationwide balance sheet by the recession. Fitch believes that further weakness in the loan book of the Nationwide building society will impact upon the company's profitability and financial str...Read More
Bankers attacked by New Economics Foundation
The New Economics Foundation has certainly set the cat amongst the pigeons today with the publication of a report which suggests that hospital cleaners are of more value to UK society than UK bankers. This is an interesting review of the value for money obtained in various areas of the UK employment market with the report suggesting that for every one pound cleaners are paid they create £10 of va...Read More
Why did the US authorities change their mind about the rescue plan?
It has been revealed over the last few days that the US authorities have changed the breakdown of their $700 million rescue package. They appear to have taken a page out of Gordon Brown's book and are now suggesting direct equity stakes in the various US banks in order to increase their financial strength.
So what about the toxic assets?
This change in strategy is set...
Sterling continues to fall as traders target the UK
Sterling continues to fall on the foreign exchanges as traders target the UK currency which is currently friendless. What was initially a situation of concern has now turned into a disaster for the UK government as the currency continues to be pounded by speculators and investors alike. So what next for the embattled UK currency?
As we have covered on a number of occasions the short...
OECD sparks bitter war of words with S&P
The Organisation for Economic Co-operation and Development (OECD) is this evening involved in a bitter war of words with credit ratings agency Standard and Poor's after a threat to downgrade the credit ratings of the UK and US. This comes after S&P recently went ahead with a downgrade of Spain's credit rating from AAA to AA+ in what they claim was a reflection of both the Spanish economy and the S...Read More