Europe - ECB & BOE 01 (May 08 - Nov 11)

[winston]

Market always leads by 6-9 months and that means a raging bull market is just around the corner, maybe 1Q09??..

Yes, we always take it as fact that the market will always lead the real economy by 6 to 9 months. Is this always true ?

As we are coming out of a deep valley, maybe the market will only lead the real economy by 1 to 3 months only

Why the hurry to be in the market so soon ? We now have instantaneous information and on time delivery of inventories..

[millionairemind]

Bank of England Governor warns economy may shrink 2pc next year
Bank of England Governor Mervyn King has predicted that the economy may contract as much as 2pc next year and signalled the Bank is prepared to drive interest rates to zero to prevent the deepening recession turning into a slump.
By Angela Monaghan
Last Updated: 12:55PM GMT 12 Nov 2008

In its Quartely Inflation Report, the Bank projects the economy will shrink by 2pc in the second quarter of next year as the credit and house-price boom of the last decade unravels.

The sharp contraction in growth will push inflation below 1pc next year, the Bank said in its widely-watched report.

"The forecasts for the real economy have also been revised down sharply, with GDP expected to contract throughout next year," said Jonathan Loynes of Capital Economics. "1pc (or below) here we come!"

Widely criticised for keeping rates too high for too long, the Bank last week slashed rates an unprecedented 1.5 percentage points to 3pc as the news from all parts of the economy deteriorates.

Inflation is now widely believed to have peaked as crude oil rapidly reverses its rise to a record $147 a barrel and the price of many commodities used in food eases.

Governor Mervyn King's predictions come as the Government and the Conservatives trade salvos on how best to tackle the deepening recession. After pledging as much as £500bn of taxpayers' money to prevent a collapse of the banking system, Gordon Brown has indicated the Government is prepared to try to spend its way out of the slowdown.

The UK economy contracted 0.5pc in the third quarter and is expected to shrink further this quarter as falling house prices and battered banks pile the pressure on households' finances.

Sushil Wadhwani and Willem Buiter, two former MPC members, have both argued that rates need to be taken down to 2pc quickly.

The inflation report - which is published every quarter - comes as figures today showed that unemployment jumped at the fastest rate in sixteen years in October.

Virgin Media, Taylor Wimpey and GlaxoSmithKline have all announced plans to cut staff in the last 24 hours, showing that the impact of the crisis that began in financial markets is now being felt far beyond the banking world.

"We're in four four or five quarters of negative growth," said Amit Kara, an economist at UBS. "We won't get hiring again until 2010."

Sterling remained lower against the dollar after the report at $1.5375, while it was slightly weaker against the euro at 81.50p.

Granted independence in one of Gordon Brown's first acts as Chancellor, the Bank is charged with keeping inflation below a 2pc over a two-year horizon.

[kennynah]

we have had so much news about how england is retarding into some economic slowdown....let's face it...she's not gonna do well for at least another 6 months...

if u hold pounds...time to convert it

[winston]

Confidence returning to markets, says ECB chief

European Central Bank head Jean-Claude Trichet said confidence is returning to financial markets.

''There is a movement toward a revival of confidence that is going in the right direction and reflects a gradual appreciation of decisions that have been taken'' by central banks, Trichet said.

The current period is ''marked by strong tensions and systemic liquidity risks.''

''At the beginning of September, we were confronted with a systemic solvency risk.''

But the ''international community now appears more united than one might think regarding what has to be done,'' notably the need to strengthen financial transparency.

He stressed it is critical to bolster risk management mechanisms, as the present crisis has its roots in ''excessive risk-taking and indebtedness by financial

[jim18xe]

will this happen today.....?

Bank of England May Cut Benchmark Interest Rate to Record Low

http://www.bloomberg.com/apps/news?pid=20601068&refer=home&sid=a0oIh41hgANQ

[millionairemind]

Jan 8, 2009
UK interest rates cut to 1.5%
LONDON - THE Bank of England cut official interest rates by a half a percentage point to 1.5 per cent on Thursday, the lowest level in its 315-year history as it attempts to ward off a prolonged recession.

The cut means officials are moving closer to the limits of conventional monetary policy after trims totaling 3.5 percentage points since the beginning of October as Britain faces its bleakest year since the early 1990s recession.

The bank's nine-member monetary policy committee said the world economy 'appears to be undergoing an unusually sharp and synchronised downturn.'

[kennynah]

so, i guess... pounds got pounded....hahahaha....

[millionairemind]

Published February 6, 2009

Britain cuts key rate to record low, ECB holds steady
Trichet says ECB may make a half-point cut to 1.5% next month

(FRANKFURT) The European Central Bank halted its campaign of rate cuts yesterday, leaving its benchmark refinancing rate at 2 per cent, while the Bank of England cut by a half-point to a record low one per cent as it combats a deepening recession brought on by the world financial crisis.

[iam802]

Bank of England seeks more authority to create money

http://business.smh.com.au/business/wor ... -8bpu.html

The Bank of England revealed Wednesday that it has sought approval from the government to create new money in a bid to kick start the economy as historically low interest rates leave the bank with limited scope for further rate cuts.

The minutes of the bank's monetary policy committee meeting in early February show a unanimous vote in favour of increasing the money supply, or so-called quantitative easing, amid fears that further rate cuts could hurt the profitability of banks.

If approved by the government, likely a formality, the bank could effectively turn on the printing press and start buying government bonds or other securities with the new cash within days.

The British central bank has lowered rates five times since October to the current 1%, the lowest level in its 315-year history.

Minutes of the February 4-5 meeting reveal that eight of its nine members voted in favour of this month's half a percentage point cut, with one member instead plumping for a greater full percentage point cut that would have brought the rate to 0.5%.

But, along with other central banks around the world, that leaves the Bank of England running out of headroom to cut rates, the most conventional method of easing monetary policy amid little evidence that the economy's slide is being halted.

The bank said it could buy gilts - government bonds - which should boost private sector demand, and also corporate bonds and commercial paper which should help the economy by easing credit conditions.

"In the present environment, where particular credit markets were not functioning normally, it was appropriate to consider increasing the supply of central bank money by more unconventional types of asset purchases," the committee said. "These measures might help to change banks' behaviour and boost the broad supply of money, which could provide a material stimulus."

Andrew Goodwin, the senior economic adviser to the Ernst & Young ITEM Club forecasting group, said was "crucial that the Bank be allowed to swiftly and boldly implement this policy."

The Treasury must respond to the monetary policy committee's request, an anticipated formality that could come within days. It will be up to the Treasury to determine how much new money can be created.

The minutes suggested that the monetary policy might have agreed on a deeper rate cut this month if it were not for the potential negative impact on bank profit margins if rates fell further.

"At very low rates of interest, the stimulus that a reduction in bank rate could provide was likely to be much reduced," the minutes said. "Indeed, there might even be a point at which further cuts in bank rate could have an adverse impact on the economy, since banks and building societies maintained a spread between their deposit and lending rates to cover the costs of providing banking services and to make a return on capital."

Some economists said that indicated that rate cutting might have stalled, but many are still forecasting a 0.5% trim when the committee meets early next month.

Bank Governor Mervyn King has said that the bank might not need to go to zero, but other rate-setters have given hints that they will vote in favour of more rate cuts.

The Bank of England's forecasts, published last week, show the economy will contract at an annual 4% rate by the end of the first quarter and inflation will slow to 0.5% at the end of next year.

Official figures out Tuesday showed a smaller-than-expected drop in annualised inflation to 3% in January, from 3.1% in December, but many economists still believe Britain is headed for destabilising deflation.

Arch-dove David Blanchflower said rates should be lowered as far as possible "without delay," arguing that at least some of the larger cut would be passed on.

"Historically, errors had been made by cutting too late rather than too soon," the US-based policy maker argued, according to the minutes.

[winston]

Policymakers at the Bank of England voted unanimously earlier this month to start the process of quantitative easing by buying gilts and other securities.

Minutes for the Bank's monetary policy committee's February meeting, published this morning, showed that all nine members of the MPC agreed that the Bank needed to act now to try and get credit moving through the UK economy again.

Quantitative easing is what non-economists call "turning on the printing press" – the authorities buy up bonds either from banks or from the commercial sector to boost the supply of money in the economy.

– The Guardian