Mervyn King plays down the threat of inflation
Mervyn King, the governor of the Bank of England, has this evening played down the threat of inflation in the UK suggesting that inflation is just as likely to under shoot its target as to overshoot. This is the first major speech from Mervyn King since August and would appear to suggest, just prior to the issue of October MPC minutes, that there is some debate within the committee as to the direction of the UK economy.
Mervyn King has many months suggested that UK inflation is not a reliable measure of economic activity and the underlying strength of the UK economy. He has for some time believed that inflation will fall back to within the banks 2% target rate in the short to medium term without any major action from the authorities. Indications that the UK economy is beginning to weaken, after a period of relative buoyancy, would seem to support this belief although so far the figures have refused to fall into place.
The Bank of England is beginning to give the impression of a body which is frustrated by the relative strength of inflation despite numerous attempts to talk down the threat of inflation in the UK.
The Bank Says No, The Markets Say Yes
The next few months will see the development of a very interesting tussle between the Bank of England and the currency markets where Sterling has been pushed to a 22 month low against the dollar. It seems as though the Bank of England's negative outlook for inflation has spooked the markets although many are now starting to price in an interest rate cut to try and revive the economy.
CBI survey reveals difficult retail market ahead
A survey by the CBI has highlighted the troubles of the UK retail sector after a brief period of respite and hope that the worst was over. The survey found that 63% of retailers have seen their sales fall in the first half of March with just 19% reporting an increase. The net balance of retailers expecting to see negative sales growth in the month of March is 44% against forecasts of around 33% on...Read More
US inflation falls to 0%
In a rather alarming turn of events, it has today been revealed that US inflation has fallen to 0% for last 12 months and would actually have fallen below zero had it not been for a rise in the cost of food and petrol. The US is now facing a potential deflationary period where negative inflation sees the price of goods and services falling month on month causing a reduction in investment, increase...Read More
Marks & Spencer suggests high street squeeze to continue
Despite some better news on the high street over the last few days, with Tesco announcing up to 10,000 the new jobs and other companies are following suit, Stuart Rose has today stepped forward to suggest that the squeeze on the high street will continue for some time to come. His company, Marks & Spencer, has been suffering for the last few months and despite a number of highly publicised promoti...Read More
Will the UK follow India in rate hike?
Today's news that the Indian authorities have been forced to push base rates higher because of strong inflation could be a perfect replica of the forthcoming UK situation. While the Indian economy may well be slightly stronger than the UK this perfectly illustrates how inflation is now becoming a major problem for some governments around the world. It is the influence of outside parties, such as t...Read More