Prior to the credit crunch and economic downturn we had very little in the way of comment of a public nature from members of the Bank of England MPC. However, over the last few weeks there have been very few days without very public and often very worrying comments from members of the MPC. So why are members of the MPC now going so public?
The JPMorgan Global Manufacturing PMI has highlighted a worrying trend in the worldwide economy with manufacturing growth slowing to a level not seen for 14 months. There has been a definitive slowdown in the growth of export orders and order books around the world which would seem to indicate the worldwide economy is on the verge of negative growth. So what can we expect in the short term?
The Confederation of British Industry (CBI) has this week joined the fight against the cap on immigration from those working in the UK from non-EU countries. This has been an ongoing issue for the UK government and is one which needs to be handled with kid gloves. So what impact would an immigration cap have on the UK business arena?
After a week when the Irish government has been under significant pressure with regards to the proposed banking bailout, which could see national debt reach 30% of GDP, it seems that the Irish authorities are prepared to take a massive gamble. For some time they have refuted rumours of a potential international bailout instead attempting to talk round investors in relation to the possible €35 billion bailout required for the Allied Irish Bank. However, when this particular strategy began to founder it seems the authorities have now moved to a different tack.
Many experts within the Eurozone believe that the European Central Bank (ECB) is attempting to pull away financial support for the likes of Greece, Ireland, Portugal and Spain at a pace which could push the European debt markets towards a premature tightening, the likes of which we saw back in 2008. Only this week we saw prominent members of the ECB stepping forward to confirm that financial support will be withdrawn in the short-term even though the situation regarding Ireland has heightened in concern over the last few days and Portugal, Greece and Spain are not yet out of the woods.
At a time when the UK economy is beginning to struggle it seems as though more and more consumers in the UK are prepared to pay off their debts rather than increase spending - and potentially create more problems for the future. Figures from the Office for National Statistics show that during August UK consumers paid off a net £120 million from outstanding debts, UK mortgage approvals fell and the trend in consumer spending is most certainly beginning to turn.
The Irish authorities are today staring at a redraft of the country's budget amid signs that the banking sector will need more capital over the next few months. Despite the fact that the Irish authorities have already introduced major austerity measures in the light of the economic collapse over the last two years it seems that more cutbacks will be required and there is concern as to whether the authorities can push through enough cost savings.
The Irish government has tonight admitted that a potential collapse of the Anglo-Irish bank could lead to a collapse of the Irish economy purely and simply because of the company's position in the Irish financial market. A systematic failure of the Irish economy would lead to a bailout by the IMF/EU although the consequences could be far-reaching with regards to other European countries and others around the world.
It seems that each and every day we read the financial press there is a new story and a new rumour regarding the UK banking sector and the reintroduction of the Bank of England's quantitative easing programme. Despite very little in the way of direct comment regarding the potential resurgence of the quantitative easing programme it seems that behind-the-scenes discussions will inevitably lead to the programme making a comeback.
Yesterday's news that the 10 year yield on Irish government bonds has reached 6.78% saw a number of investors running for the hills amid concerns that the bailout of Anglo Irish bank could top the $35 billion forecast by credit rating agency S&P. This is a bitter blow for the Irish authorities who have battled all week to contain a situation which has the potential to run out of control fairly quickly.
