Comments: Cyclical trickery only buys time

The MPC has the best of both worlds at the moment. Talk of a rate cut has depressed the poundís effective exchange rate by 4.4% since the end of April, helping exporters, but the MPC hasnít actually made borrowing easier for consumers.

Even so, consumer borrowing is on the rise again (according to the BBA) Ė a case for holding current interest rates.

But the CBI says firms are losing confidence - while export orders are rising. Perhaps holding interest rates will stiffen their resolve to export. It doesnít seem likely the pound will recover that 4.4% very quickly under present circumstances.

Also, the MPC must be aware the US seems likely to keep raising their interest rates for the rest of this year. That will increse the value of the dollar and the cost to the UK of commodities priced in dollars.

It'll take more than crunching the numbers through a model to get this one right.

Posted by David Sandiford at July 27, 2005 11:02 AM

Its going to get really interesting if and when Brown takes over as Prime Minister.

I am wondering if Brown will become another Eden or Major - i.e. cuckold who doesn't really shine after a really successful leader.

If the economy slides into recession and the public finances are in disarray then Brown is scuppered. His political credibility will wane. He will be an easy target on his supposed strong area - the economy. And he is unproven at managing any other brief. I am beginning to think that there is a good risk of him becoming a liability. Does Tony know that?!

I see too much tinkering by Brown and too many unrealistic assumptions. Unrealistic about UK growth and unrealistic about the pace and scale of reform, cost cutting and head-chopping in the public sector and civil service.

I think when the Chancellor starts to get one of the bread and butter items wrong (taxes, public finances, inflation, or interest rates) then he is starting to wobble.

Posted by Angry Economist at August 12, 2005 04:19 PM