One of the conditions of central bank independence, especially for the Fed, is to not comment on fiscal matters. You leave the government alone and the government will leave the central bank alone. The Bank of England is not take this advice. The Bank of England governor, Mervyn King, said last month that Britain lacked “a credible plan” for cutting its £175bn deficit. This fight is also tied to the potential end of QE by the BOE. The BOE is placed in a difficult situation whereby interest rates will start to rise when they want to stop QE. The recovery may be slowed and the BOE may be forced to continue or add to their QE policy.
GBP is off the lows from earlier in 2009 but it has been stuck around 1.65. It is unlikely that there will be any significant appreciation of sterling when this monetary policy uncertainty overhangs the market. Every time gilts have tried to rally this fiscal problem slaps the market down.
GBP is off the lows from earlier in 2009 but it has been stuck around 1.65. It is unlikely that there will be any significant appreciation of sterling when this monetary policy uncertainty overhangs the market. Every time gilts have tried to rally this fiscal problem slaps the market down.
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