IMF downgrades UK’s annual growth forecast (Daniel Johnson)

IMF justify UK growth down grade on Brexit uncertainty

The  International Monetary Fund have put out their annual growth forecasts this week. The growth outlook for the global economy was raised from 3.2% to 3.7%. The UK however did little to attribute to the new prediction however, UK growth was downgraded to 1.7% from 1.9%. Growth in the UK is expected to trail Greece for the next five years due to the uncertainty surrounding Brexit.

BOE Interest Hike anticipated for November

Mark Carney, the governor of the Bank of England has indicated that there is the possibility of a rate hike in the coming months. The market seemed to believe his comments and investor confidence grew and the pound rallied against the Euro. This is evidence that the market moves on rumour as well as fact. There is now apparently a 77% chance of a hike on 2nd November. The justification for the hike is dubious, unemployment is currently at the lowest levels since the 70’s although the employment situation may not be as healthy as it appears as zero hour contracts have been added to the equation which is not the healthiest form of employment. Inflation is worryingly high at 2.9%. Inflation is only healthy if average wage growth is growing at ta similar pace at present it isn’t and has fallen to 2.1%. Carney may shoot himself in the foot if there is no hike. He could have been using a method referred to as jawboning to talk up the currency as apposed to taking action and making any real changes to monetary policy. If the hike does not materialise Sterling could suffer heavy losses. The MPC who vote on interest rates voted 7-2 in favour of keeping rates on hold at their last meeting. Could we really see such a change in stance November?

Catalonian Independence

The referendum on Catalonian independence has been deemed non legal by the Spanish government, but it has to be taken seriously due to the number of supporters for a break from Spain. Catalonia’s president, Carles Puigdemont did announce the regions independence from Spain, but then put the move on hold in order to negotiate with the government. A recognised referendum is now a  possibility. If this does occur this could create significant Euro weakness.

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