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Sterling has today picked up sharply after weeks and weeks of pressure and selling by investors. This comes just ahead of the MPC meeting to decide their next move on UK base rates and until just a...
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Wednesday 3rd September 2008
As we approach the next Bank of England MPC meeting there is literally no scope for the bank to change rates at the moment. As we have said on so many occasions, inflation is running away while the economy is literally crashing around our feet. Then we have the infamous split in the MPC with one member looking for a rate reduction, one for a rise and the rest looking for no change. Do not expect fireworks this month.
On the other hand next month could be a very different situation with concern that the economy could soon succumb to the first stage of a technical recession. The Bank of England has been accused of leaving action too late but they will be under severe pressure next month to reduce rates and kick start the economy, even if inflation has not weakened.
These MPC meeting are becoming very boring at the moment and while we all know what we want the Bank of England to do there hands are literally tied behind their backs. If Gordon Brown’s recent efforts to breathe new life into the property market fail then there will literally be no other option. However, a rate reduction would fuel inflation, see pressure on wage rises and increase unemployment. |
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