Category Archives: BOE

Currency pairs getting punished on central bank comments.

http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech986.pdf

https://www.bloomberg.com/news/articles/2017-06-28/draghi-s-prudence-warning-confirmed-by-reaction-to-his-own-words

 

 

 

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  • 78
    Mario Draghi has set the bar high for the European Central Bank’s next meeting Thursday. The bank president’s warning about reduced inflation expectations, made in a speech on Aug. 22, fanned hopes that the ECB may announce additional stimulus measures to boost economic growth and prices. A report Friday showing…
    Tags: ecb, bank, central
  • 78
    Press conference following the meeting of the Governing Council of the European Central Bank on 4 September 2014 at its premises in Frankfurt am Main, Germany, starting at 2:30 p.m. CET: Introductory statement by Mario Draghi, President of the ECB. Question and answer session. Registered journalists pose questions to Mario Draghi, President…
    Tags: ecb, central, bank
  • 77
    Though ECB cut  was covered by the Press in great details but only a few analyzed the results of such measure. Only independent writer/economists talked about the potential losers and winners of the situation. In this article featured in The Telegraph , an economic writer talks about critiques the actions of…
    Tags: ecb, bank, central
  • 76
    Runners have target times, golfers judge themselves by their swing, while Mario Draghi watches a technical measure of inflation expectations used by financial markets. Just one problem: it suggests the European Central Bank president is not achieving his objective – and that markets’ fears of eurozone deflation are mounting. Since…
    Tags: central, ecb, bank
  • 74
    Press conference following the meeting of the Governing Council of the European Central Bank on 6 March 2014 at its premises in Frankfurt am Main, Germany, starting at 2:30 p.m. CET: Introductory statement by Mario Draghi, President of the ECB. Question and answer session. Registered journalists pose questions to Mario…
    Tags: ecb, central, bank

No central bank had considered any of these measures

Who would have thought that six years after the global financial crisis, most advanced economies would still be swimming in an alphabet soup – ZIRP, QE, CE, FG, NDR, and U-FX Int – of unconventional monetary policies? No central bank had considered any of these measures (zero interest rate policy, quantitative easing, credit easing, forward guidance, negative deposit rate, and unlimited foreign exchange intervention, respectively) before 2008. Today, they have become a staple of policymakers’ toolkits.

Indeed, just in the last year and a half, the European Central Bank adopted its own version of FG, then moved to ZIRP, and then embraced CE, before deciding to try NDR. In January, it fully adopted QE. Indeed, by now the Fed, the Bank of England, the Bank of Japan, the ECB, and a variety of smaller advanced economies’ central banks, such as the Swiss National Bank, have all relied on such unconventional policies.

One result of this global monetary-policy activism has been a rebellion among pseudo-economists and market hacks in recent years. This assortment of “Austrian” economists, radical monetarists, gold bugs, and Bitcoin fanatics has repeatedly warned that such a massive increase in global liquidity would lead to hyperinflation, the US dollar’s collapse, sky-high gold prices, and the eventual demise of fiat currencies at the hands of digital krypto-currency counterparts.

None of these dire predictions has been borne out by events. Inflation is low and falling in almost all advanced economies; indeed, all advanced-economy central banks are failing to achieve their mandate – explicit or implicit – of 2% inflation, and some are struggling to avoid deflation. Moreover, the value of the dollar has been soaring against the yen, euro, and most emerging-market currencies. Gold prices since the fall of 2013 have tumbled from $1,900 per ounce to around $1,200. And Bitcoin was the world’s worst-performing currency in 2014, its value falling by almost 60%.

To be sure, most of the doomsayers have barely any knowledge of basic economics. But that has not stopped their views from informing the public debate. So it is worth asking why their predictions have been so spectacularly wrong.

The root of their error lies in their confusion of cause and effect. The reason why central banks have increasingly embraced unconventional monetary policies is that the post-2008 recovery has been extremely anemic. Such policies have been needed to counter the deflationary pressures caused by the need for painful deleveraging in the wake of large buildups of public and private debt.

In most advanced economies, for example, there is still a very large output gap, with output and demand well below potential; thus, firms have limited pricing power. There is considerable slack in labor markets as well: Too many unemployed workers are chasing too few available jobs, while trade and globalization, together with labor-saving technological innovations, are increasingly squeezing workers’ jobs and incomes, placing a further drag on demand.

Moreover, there is still slack in real-estate markets where booms went bust (the United States, the United Kingdom, Spain, Ireland, Iceland, and Dubai). And bubbles in other markets (for example, China, Hong Kong, Singapore, Canada, Switzerland, France, Sweden, Norway, Australia, New Zealand) pose a new risk, as their collapse would drag down home prices.

Commodity markets, too, have become a source of disinflationary pressure. North America’s shale-energy revolution has weakened oil and gas prices, while China’s slowdown has undermined demand for a broad range of commodities, including iron ore, copper, and other industrial metals, all of which are in greater supply after years of high prices stimulated investments in new capacity.

China’s slowdown, coming after years of over-investment in real estate and infrastructure, is also causing a global glut of manufactured and industrial goods. With domestic demand in these sectors now contracting sharply, the excess capacity in China’s steel and cement sectors – to cite just two examples – is fueling further deflationary pressure in global industrial markets.

Rising income inequality, by redistributing income from those who spend more to those who save more, has exacerbated the demand shortfall. So has the asymmetric adjustment between over-saving creditor economies that face no market pressure to spend more, and over-spending debtor economies that do face market pressure and have been forced to save more.

Simply put, we live in a world in which there is too much supply and too little demand. The result is persistent disinflationary, if not deflationary, pressure, despite aggressive monetary easing.

The inability of unconventional monetary policies to prevent outright deflation partly reflects the fact that such policies seek to weaken the currency, thereby improving net exports and increasing inflation. This, however, is a zero-sum game that merely exports deflation and recession to other economies.

Perhaps more important has been a profound mismatch with fiscal policy. To be effective, monetary stimulus needs to be accompanied by temporary fiscal stimulus, which is now lacking in all major economies. Indeed, the eurozone, the UK, the US, and Japan are all pursuing varying degrees of fiscal austerity and consolidation.

Even the International Monetary Fund has correctly pointed out that part of the solution for a world with too much supply and too little demand needs to be public investment in infrastructure, which is lacking – or crumbling – in most advanced economies and emerging markets (with the exception of China). With long-term interest rates close to zero in most advanced economies (and in some cases even negative), the case for infrastructure spending is indeed compelling. But a variety of political constraints – particularly the fact that fiscally strapped economies slash capital spending before cutting public-sector wages, subsidies, and other current spending – are holding back the needed infrastructure boom.

All of this adds up to a recipe for continued slow growth, secular stagnation, disinflation, and even deflation. That is why, in the absence of appropriate fiscal policies to address insufficient aggregate demand, unconventional monetary policies will remain a central feature of the macroeconomic landscape.

Read more at http://www.project-syndicate.org/commentary/unconventional-monetary-policies-and-fiscal-stimulus-by-nouriel-roubini-2015-02

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    Here’s what to look for from the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole,Wyoming, which runs Aug. 21-23. -- Yellen’s keynote: The highlight will be Fed Chair Janet Yellen’s speech Aug. 22 on labor markets at 10 a.m. New York time. She’ll probably reiterate the Fed’s view…
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  • 76
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  • 71
    Runners have target times, golfers judge themselves by their swing, while Mario Draghi watches a technical measure of inflation expectations used by financial markets. Just one problem: it suggests the European Central Bank president is not achieving his objective – and that markets’ fears of eurozone deflation are mounting. Since…
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  • 71
    Mario Draghi has set the bar high for the European Central Bank’s next meeting Thursday. The bank president’s warning about reduced inflation expectations, made in a speech on Aug. 22, fanned hopes that the ECB may announce additional stimulus measures to boost economic growth and prices. A report Friday showing…
    Tags: ecb, bank, inflation, deflation, banks, easing, central, prices
  • 69
    The European Central Bank announced some measures to ease monetary policy two weeks ago. The euro had been on a downtrend since May and by these measures the ECB increased its support to the economy. The result? Two weeks later, EUR/USD stabilized just above 1.35. This week’s Eurozone economic calendar…
    Tags: bank, monetary, central, fed, easing, ecb

Why you should care about bonds even if everyone is talking about stocks

The US stock market gets all the attention, but the bond market is where the real fortunes are made. Chris Arnade, a former bond trader, describes the unsmiling, powerful markets that move companies and governments

On Wall Street, nearly everybody trades either stocks or bonds. Stock traders are the smiling guys with short hair, button-up blue Brooks Brother shirts, and dark navy pinstripe suits. Bond traders are the same guys, only without the smile.

Stocks do well when the world is doing well and bonds mostly do well when things are going badly. This makes bond traders widely disliked. It is not cool to smile when things are going badly for everyone else.

I traded bonds for 20 years. During that time, countless friends, relatives, friends of relatives, drunk strangers and strange drunks asked me: “What stock should I buy?”

Nobody asked me about bonds. Maybe I should have smiled more.

Stocks seem easy. They are a single price that tells a story on how a company is doing: Apple at $100? Great! Bank of America at $15? Not so hot.

Bonds don’t seem easy. They have a yield, they have price, they have maturity, and they have a coupon. There are government bonds, there are corporate bonds, there are bonds issued by cities. Bonds are individual contracts to pay back a debt. They have a lot of moving parts.

Stocks are how you make money and bonds are how you borrow money. Everybody likes making money, nobody likes borrowing money.

bonds
Specialist Henry Becker, left, directs trading at the post that handles AIG on the floor of the New York stock exchange. Stocks extended their decline and bond prices jumped a day after Wall Street’s steady collapse on the week of the crisis.

http://www.theguardian.com/business/2014/nov/03/bond-market-matters-talking-stocks

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  • 67
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  • 52
    U.S. Treasury yields and other interest rates increased in the months leading up to the Federal Reserve’s December 2013 decision to cut back its large-scale bond purchases. This increase in rates probably at least partly reflected changes in what bond investors expected regarding future monetary policy. Recent research on this…
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  • 50
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  • 49
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    Tags: fed, ecb
  • 47
    http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech986.pdf https://www.bloomberg.com/news/articles/2017-06-28/draghi-s-prudence-warning-confirmed-by-reaction-to-his-own-words      
    Tags: ecb, boe

Scottish independence special

Scottish independence: Foreign investors desert British economy amid fears of ‘yes’ vote

Up to £12bn withdrawn as Japanese bank Nomura warns of possible sterling ‘collapse’

http://www.independent.co.uk/news/uk/scottish-independence/scottish-independence-foreign-investors-desert-british-economy-amid-fears-of-yes-vote-9720967.html

Scots, What the Heck?

Comparing Scotland with Canada seems, at first, pretty reasonable. After all, Canada, like Scotland, is a relatively small economy that does most of its trade with a much larger neighbor. Also like Scotland, it is politically to the left of that giant neighbor. And what the Canadian example shows is that this can work.

http://www.nytimes.com/2014/09/08/opinion/paul-krugman-scots-what-the-heck.html?_r=3

Scotland far closer to sovereignty than Quebec as Marois heads to Edinburgh for meeting with separatists

The Parti Québécois long served as a source of inspiration to Scottish nationalists looking to achieve independence.

http://fullcomment.nationalpost.com/2013/01/27/graeme-hamilton-scotland-far-closer-to-sovereignty-than-quebec-as-marois-heads-to-edinburgh-for-meeting-with-separatists/

Scottish independence: have we seen these tactics before in Québec?

As the yes side gains momentum, parallels in the response can be drawn to the 1995 campaign in Canada

 

http://www.theguardian.com/politics/2014/sep/07/scottish-independence-tactics-quebec

Let’s push this more and post some more pages

In opinion pieces:
http://wingsoverscotland.com/a-letter-from-quebec/
http://www.newstatesman.com/politics/2012/12/independent-scotland-could-look-wee-canada
http://blogs.lse.ac.uk/europpblog/2014/07/26/what-the-independence-referendums-in-quebec-suggest-about-scotland/
http://www.bbc.com/news/magazine-29077213
http://montrealsimon.blogspot.com/2014/09/why-scottish-referendum-is-not-quebec.html

On Risks,
http://www.independent.co.uk/news/uk/this-britain/how-black-gold-was-hijacked-north-sea-oil-and-the-betrayal-of-scotland-518697.html
http://www.theguardian.com/commentisfree/2014/sep/02/scots-independence-england-scotland
http://www.theguardian.com/politics/2012/jan/14/scottish-independence-alistair-darling
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10652595/Standard-Life-to-warn-of-risks-of-Scottish-independence.html
http://www.bbc.com/news/uk-scotland-26864329

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    Sterling fundamentals will take centre-stage on Wednesday with high volatility inevitable. The Bank of England inflation report will have a mixed tone and plenty of caveats, especially as Governor Carney will want to keep as much flexibility as possible. While not ruling out a 2014 rate increase, he will again…
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  • 48
    . ECB and BOE interest rates remain on hold. ECB keep at 0.25 % UK keep at 0.5% The press conference  with ECB President - Mario Draghi - and Vice President -Vito Constâncio - will tells us more
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  • 48
    If trade and financial sanctions were imposed on Russia, the cost to the UK might well exceed the cost to Russia. That is presumably why the Foreign Office wrote - in a document carelessly (or deliberately?) displayed yesterday for the lenses of photographers - that "the UK should not support…
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  • 46
    (Source http://www.independent.co.uk/news/business/comment/david-blanchflower/david-blanchflower-we-should-fear-deflation--not-welcome-it-9986726.html ) The UK isn’t in deflation yet. While central bankers know what to do about stopping inflation, they don’t know what to do about halting deflation. The Swiss National Bank last week abandoned its attempt to defend a currency floor, which caused a sharp appreciation in its currency, which…
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  • 43
    Osper, a new UK startup, has come up with an innovative way to create a banking service than can be used by children, combining prepaid debit cards and smartphone apps controlled by both them and their parents. The approach could potentially reach a market underserved by most banks, but which…
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Reminder :: Quantitative easing alone will not do the trick

Very low inflation poses a mounting threat to the economic stability of the eurozone. The rate of consumer price inflation has been below 1 per cent since October, and hence far below the European Central Bank’s (ECB) target of just below 2 per cent. This highlights the degree of weakness in the eurozone economy – and reinforces it – notwithstanding the optimism generated by a return to modest growth. And it further increases doubts over debt sustainability across the currency union: without a healthy dose of inflation, it is much harder for households, firms and governments to reduce their debt burdens.  To make things worse, in the most indebted countries, such as Greece, Portugal, Spain and Italy, inflation is even lower than the eurozone average. In response, many observers argue that the ECB should employ unconventional tools like quantitative easing (QE) to boost inflation. The problem is that QE alone is unlikely to be effective without a significant change in the ECB’s approach to monetary policy. The ECB needs to manage people’s expectations about the future path of demand, income and inflation more forcefully if it is to generate a proper economic recovery across the Eurozone. 

 

See more at: http://www.cer.org.uk/insights/quantitative-easing-alone-will-not-do-trick#sthash.00rBSkSf.dpuf

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  • 76
    Who would have thought that six years after the global financial crisis, most advanced economies would still be swimming in an alphabet soup – ZIRP, QE, CE, FG, NDR, and U-FX Int – of unconventional monetary policies? No central bank had considered any of these measures (zero interest rate policy,…
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  • 73
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  • 73
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  • 72
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August 13th 2014: Preview: Sterling faces huge event risk

Sterling fundamentals will take centre-stage on Wednesday with high volatility inevitable. The Bank of England inflation report will have a mixed tone and plenty of caveats, especially as Governor Carney will want to keep as much flexibility as possible. While not ruling out a 2014 rate increase, he will again insist that policy is data dependent. Sterling bulls and bears should both be able to find some comfort in the report with the threat of several shifts in direction. The overall tone is likely to be slightly less convincing surrounding the economy and sentiment will already be damaged if there is a negative reading for headline average earnings amid the threat of further underlying profit taking. The best approach looks to be fading any initial headline Sterling spike higher against the dollar. Alternatively, run a limited short Sterling position ahead of the unemployment release with wide stops.

 

Over the first half of 2014, Sterling pushed strongly higher as short-term funds moved aggressively into the currency with stronger growth fuelling expectations of Bank of England tightening. The mood has turned more cautious over the past few weeks with doubts over the sustainability of growth and greater doubts over the interest-rate path. After prepping markets in June for a possible 2014 interest rate increase, Governor Carney failed to follow-through on his hawkish rhetoric.

 

The fundamental reports due on Wednesday will be extremely important for sentiment and Sterling. Markets are not fully pricing in a 0.25% rate increase until March 2015 so there is certainly scope for sharp short-term Sterling gains if there are strong hints over a 2014 rate increase.

 

First up for release will be the latest labour-market data. Markets have almost become immune to strong clamant-count data with declines of over 20,00 every month since July 2013. The unemployment rate is likely to have ticked lower to 6.4% from 6.5%, in theory pushing the economy closer to full employment which could push the Bank of England nearer to tightening. The earnings data will be watched extremely closely and is likely to be the most important element given that the Bank of England is very uncertain how much spare capacity is still available in the economy. A slow rate of earnings growth would suggest that there is still considerable spare capacity even with falling unemployment. Significantly, the consensus forecast is for earnings to fall 0.1% in the year to June which would be an important negative Sterling factor. Concerns over very weak productivity would be a key long-term bearish Sterling influence.

 

One hour after the labour-market data the latest Bank of England inflation report will be released. This provides the bank’s economic forecasts and is the backdrop for yield expectations. The report will be extremely important as the central bank will want to provide the theoretical underpinning and justification for any monetary tightening. With the next report due for release in November, failure to signal a rate hike this month would substantially undermine the possibility of an increase this year.

 

 

 

 

These are several key factors to watch in the inflation report:

 

  1.  The bank will estimate how much spare capacity is still available in the economy. Previously, the estimate was 1-1.5% of GDP. Any increase in this estimate to say 1.5-2.0% would effectively rule out and interest rate increase for 2014, while a reduction in this estimate would make an increase this year much more likely.

 

  1.  The inflation forecasts will obviously be important as they are the bank’s central focus. A projected rate below 2% in two-years time would lessen the risk of an early tightening.

 

  1.  Comments on Sterling will need to be watched closely. The bank expects Sterling strength over the first half of 2014 to dampen inflation. Markets will need to watch carefully whether there are warnings over potential damage to the economy from an over-valued currency and any attempt to talk it down. Any warnings over balance of payments vulnerability will also be important.

 

  1.  International growth forecasts will be important with the bank likely to be more wary over the Euro-zone outlook and wider global trends which will also make it cautious over any early tightening.

 

  1.  Governor Carney’s press conference will need to be watched very closely as the media probes for more decisive rhetoric on interest rates and there is the scope for high volatility during the press conference as well as on the inflation report headlines.

 

Follow breaking news and analysis on Twitter –  Follow @Investicafx

 

http://www.investica.co.uk/marketreport13-08-14.htm

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  • 55
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  • 55
    A number of readers have asked me to explain why deflation is a bad thing; and the truth is that while I’ve alluded to the issue a number of times, I’m not sure if I’ve ever laid out the whole case. So here goes. There are actually three different reasons…
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  • 55
    Scottish independence: Foreign investors desert British economy amid fears of 'yes' vote Up to £12bn withdrawn as Japanese bank Nomura warns of possible sterling 'collapse' http://www.independent.co.uk/news/uk/scottish-independence/scottish-independence-foreign-investors-desert-british-economy-amid-fears-of-yes-vote-9720967.html Scots, What the Heck? Comparing Scotland with Canada seems, at first, pretty reasonable. After all, Canada, like Scotland, is a relatively small economy that…
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  • 54
    For a decade, starting in the late nineteen-eighties, Ramesh Ramanathan worked his way up the executive ladder at Citibank in the United States. Then he led its corporate-derivatives branch in London. In 1998, however, he quit and returned to India, his country of birth. He had a new goal: finding…
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Unprecedented stimulus by the Fed and other central banks made many traditional models useless,

If the insatiable demand for bonds has upended the models you use to value them, you’re not alone.

Just last month, researchers at the Federal Reserve Bank of New York retooled a gauge of relative yields on Treasuries, casting aside three decades of data that incorporated estimates for market rates from professional forecasters. Priya Misra, the head of U.S. rates strategy at Bank of America Corp., says a risk metric she’s relied on hasn’t worked since March.

After unprecedented stimulus by the Fed and other central banks made many traditional models useless, investors and analysts alike are having to reshape their understanding of cheap and expensive as the global market for bonds balloons to $100 trillion. With the world’s biggest economies struggling to grow and inflation nowhere in sight, catchphrases such as “new neutral” and “no normal” are gaining currency to describe a reality where bonds are rallying the most in a decade.

http://www.bloomberg.com/

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  • 68
    http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech986.pdf https://www.bloomberg.com/news/articles/2017-06-28/draghi-s-prudence-warning-confirmed-by-reaction-to-his-own-words      
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  • 67
    The US stock market gets all the attention, but the bond market is where the real fortunes are made. Chris Arnade, a former bond trader, describes the unsmiling, powerful markets that move companies and governments On Wall Street, nearly everybody trades either stocks or bonds. Stock traders are the smiling…
    Tags: bonds, fed, ecb, boe
  • 66
    Very low inflation poses a mounting threat to the economic stability of the eurozone. The rate of consumer price inflation has been below 1 per cent since October, and hence far below the European Central Bank’s (ECB) target of just below 2 per cent. This highlights the degree of weakness…
    Tags: inflation, ecb, demand, central, bank, economy, currency, fed
  • 65
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    Tags: economies, demand, central, bank, global, banks, market, inflation, fed, ecb

Pound Rises Most in Two Months on Recovery Signs, #IMF Forecasts #GBP

The pound rose the most in two months versus the dollar this week as manufacturing and production data signaled the U.K. recovery is on track, boosting bets the Bank of England will raise interest rate and is going to nudge higher throughout the course of this month

The pound gained 1 percent this week, Industrial production increased 0.9 percent in February from the previous month and manufacturing output climbed 1 percent.

Growth Estimates

The IMF raised its forecasts for U.K. growth, predicting the economy will grow 2.9 percent in 2014.

Sterling gained 4.4 percent in the past six months, The euro climbed 1.9 percent, while the dollar slid 1 percent.Policy makers kept the benchmark interest rate unchanged at a record-low 0.5 percent at a meeting this week.

Annualized inflation slowed to 1.6 percent in March, from 1.7 percent the month before. The unemployment rate is estimated to 7.1 percent in the three months through February. This may prompt policy makers to consider to raise the interest rate.

Officials said in February there would be scope to maintain record-low rates even after the threshold is reached.

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  • 73
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  • 71
    För 10 år sedan verkade den globala ekonomin att vara på bättringsvägen.  Räntorna gick ner till 1 %, Storbritannien var i sitt 12:e år av oavbruten tillväxt, Kina var en del av WTO och alla trodde på att marknaderna själva kunde korrigera sig. Den monetära systemkrasch som kom var oförutsedd…
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  • 62
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  • 62
    If trade and financial sanctions were imposed on Russia, the cost to the UK might well exceed the cost to Russia. That is presumably why the Foreign Office wrote - in a document carelessly (or deliberately?) displayed yesterday for the lenses of photographers - that "the UK should not support…
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Dr Faber predict stock market crash #Stockmarket #nasdaq

Dr Faber is predicting a 1987-type stock market crash this year only it will be worse.

The US technology-heavy Nasdaq plummeted by 3.1 per cent on Thursday night (US time), its biggest one-day drop since November 2011.

Dr Faber, the editor of the Gloom, Boom & Doom Report, has already called for growth stocks to decline this year. He said ridiculous stock valuations were not the crash catalysts, saying the Federal Reserve was also to blame.

“This year, for sure – maybe from a higher diving board – the S&P will drop 20 per cent,” Dr Faber said.

CNBC noted that Dr Faber predicted in August last year a 1987-type crash was looming.

Since then the S&P 500 has risen about 9 per cent.

Mr Grantham said the bust would be particularly painful because “the Fed and other central banks around the world have taken on all this leverage that was out there and put it on their balance sheets.”They will become cheap again. That’s how we will pay for this. It’s going to be very painful for investors,”

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ECB and BOE interest rates remain on hold

UK-ECB.

ECB and BOE interest rates remain on hold.

ECB keep at 0.25 %

UK keep at 0.5%

The press conference  with ECB President – Mario Draghi – and Vice President -Vito Constâncio – will tells us more

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