You’ve slashed the interest rates,
You’ve raised the debt,
You’ve crumpled manufacturing,
And yet…
The currency just won’t stay down anymore.
Is this the situation in which the UK now finds itself? FT Alphaville wonders if — having established that sterling weakness is good for the economy in its latest statement — the Bank of England will actually have to talk down the currency?
After all, sterling is up on Friday despite some of the worst factory output figures since 1981 (factory output down 7.4 per cent year-on-year in November).
All that said, Bank of New York Mellon’s Simon Derrick says it’s a phenomenon that shouldn’t last too long:Were the MPC to make a commitment to maintain an accommodative stance for an extended period of time, we suspect that the impact on GBP would very similar to that seen on the USD back in 2002 and 2003. Given that such a move by the MPC must seem a distinct possibility, we suspect that GBP’s current strength may prove a temporary phenomenon.
Remember, the UK isn’t good enough to join the euro according to ECB board member Lorenzo Bini Smaghi.
Related links:
Could sterling’s plunge be a good thing? – FT Alphaville
We can collapse our own currency, thank you very much – FT Alphaville