5 December 2013
Osborne to proclaim that austerity is working
The chancellor, George Osborne, will use his Autumn Statement to deliver a positive outlook for the UK economy together with the prospect for tax cuts following the next election. The Office for Budget Responsibility support the view, having raised growth forecasts for the UK economy for 2013 from 0.6% to 1.5% and, for 2014, from 1.8% to 2.5%. The economic boost could see the UK deliver a budget surplus as early as 2018, two years earlier than predicted back in March
18 November 2013
ECB conflict in store?
Whereas last week was dominated by central bank grandstanding, this week sees a raft of consumer and industry sentiment surveys for the UK, US and the eurozone. Most interest will be directed towards the eurozone which is struggling with falling growth rates and weakening inflation. The ECB has now cut rates and starting to run out of policy ammunition, raising the likelihood of a move to a form of QE similar to that undertaken by the BofE and US Fed. This is deeply unsettling for German Chancellor Angela Merkel, who has yet to form a government, and sets the scene for a conflict which will need watching closely.
12 November 2013
Gilts steady despite surprising fall in UK inflation
The UK 10-year Gilt yield fell just a few basis points to 2.78% as inflation fell to 2.2% against average market expectations around 2.5%. This data is quite satisfying for both the Bank of England and the Government coming as it does on the back of better economic growth and falling unemployment. Governor Mark Carney still reiterates the Bank's mandate of targeting 2% inflation but their guidance on when base rates may rise is clearly contingent upon a fall in the unemployment rate to at least 7%, which has just edged lower to 7.6%