The one guaranteed outcome of the US Fed’s new policy of forecasting interest rates is that the forecasts will ultimately be wrong. And that will undermine the world’s most important financial policymaker.
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Standard & Poor’s threat to cut Germany’s AAA credit rating is a statement of the obvious, however much it shocked Berlin and international investors. If poor countries pool their debt with strong nations, they bring down the better states’ ratings.
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The Bank of England knows it must raise interest rates – and it knows that it can’t. So the market has raised rates anyway, making the Bank increasingly irrelevant.
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Why are UK interest rates so low? To curb inflation? To help industry? The real reason has been to save the housing market from collapse.
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Disposable cameras are ejected from the government’s inflation calculations and cereal bars inserted: it may reflect our changing lives but it distorts the statistics. The 2010 retail prices index cannot properly be compared with the previous year’s if the components keep changing.
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If credit-card rates are at a 12-year peak but card usage is at record levels, why do we think interest rates are a tool for controlling the economy and inflation? Consumers appear insensitive to rates.
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When will UK interest rates rise? Not before the general election but they could well be increased before the end of the year. And if there is a run on the pound, the pressure will be for higher rates sooner rather than later.
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As the UK economy’s return to growth was slower and lower than expected, should we prepare for a return to recession? That could be the second dip of a W-shaped curve - but it might even stem from a revision of the figure that seemingly ended the slump.
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The period of falling prices and low inflation was novel but all good things come to an end: from now on it looks like business as normal as prices rise again. And why would any government or central bank want otherwise?
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The first indication that post-crisis regime of low interest rates is ending has emerged – on the opposite side of the world. Australia’s quarter per cent rise will gradually trigger increases across the rest of the globe.
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