The Bank of England (BOE) followed the steps of the European Central Bank (ECB) earlier this week. This morning came news that England’s overnight and short-term rates would be kept static at 0.50%. While England is not in the same boat as the ECB, it is right across the channel and its banks have many overlaps in Europe.
With Spain on the path to having to take a bailout of some sort and with Greece on the ropes, the state of the Euro is one which would pressure England due to so many business overlaps. There has been some growing pressure for the BoE to institute more stimulus measures, but what that will be is not yet known. The Europeans have an overnight right of 1.00% versus rates of only 0.50% in England, so England only has such much room to stimulate by classic rate cuts. One such call has come from Christine Lagarde of the International Monetary Fund.
More news ahead, more pain ahead…
JON C. OGG