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.
Unemployment figures released in error
The Office for National Statistics is this evening under severe pressure after UK unemployment figures were released 24 hours early. However, the early release has not taken away the impact of the figures which showed a rise of 244,000 in the first three months of 2009 culminating in a total of 2.2 million people now out of work. While an investigation is underway within the Office for National St...Read More
Is Bank of England independence really that important?
Prior to the Bank of England receiving total independence from the government of the day there had been numerous charges of political interference in various aspects of the UK economy, with the direction of base rates the more common complaint. In the past we have seen governments move interest rates in an advantageous manner ahead of a general election to try and boost their own chances of being...Read More
Lord Mandelson causes controversy again
When Gordon Brown brought Lord Mandelson back to the Cabinet many people suggested he was either crazy or touched by genius. Initially it seemed that the move went down very well but today we saw Lord Mandelson commenting upon the euro and the fact that, despite opposition from UK voters, inevitably the pound will disappear in favour of the single European currency. This has caused significant con...Read More
Will bank bonuses ever return to previous levels?
As we see Goldman Sachs attempting to understate employee bonuses after announcing figures for the latest quarter, there is a feeling that slowly but surely both US and UK banks are reverting back to norm. At the moment it is well-known that the US government and the UK government have asked their respective banking industries to go easy on bonus payments as a means of placating US and UK taxpayer...Read More
FSA censors two traders from Dresdner
The FSA (Financial Services Authority) has today censored two traders from Dresdner bank in relation to a Barclays bank bond issue back in 2007. It would appear that the traders in question had initially caught wind of the bond issue, which was to be on more favourable terms than existing Barclays bonds. As a consequence they are alleged to have approached various investors to "sound them out" abo...Read More