Bank of England; Be Careful Shorting The Pound.
Written by A Forex View From Afar on Thursday, January 17, 2008Back to www.thelfb.com
Evidence of a damaging cocktail of faltering growth and inflationary pressures was revealed in the British Chambers of Commerce's (BCC) latest quarterly survey today.
The BCC said the figures signaled that the Bank of England's Monetary Policy Committee is facing a tough decision on whether to hold or reduce borrowing costs. Nevertheless, it repeated recent calls for a small interest rate cut early in the year.
However, the Bank of England's Deputy Governor, Sir John Gieve hinted that interest rates may not fall as sharply as expected. Sir John said the recent financial market turmoil had strengthened the case for lower borrowing costs but that inflationary pressures mean policymakers faced difficult decisions.
He also suggested conditions warranted a shift "from restrictive monetary policy to a more neutral stance”.
The number of British manufacturers reporting pressure to raise prices climbed by 9 points in the fourth quarter to a record. Among service firms, the balance of firms expecting to raise prices also reached a record.
Of particular concern for the services sector, export balances were "disturbingly weak" while profitability confidence has plummeted by 17 points.
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