Central Banks around the world are increasing interest rates because of concerns about inflation. However, the curious feature of this economic cycle is that Central Banks are raising rates, just as economies go into recession. Higher interest rates will, therefore, exacerbate the economic downturn and cause a deeper recession and higher unemployment. So why are …
The recent surge in UK government gilts is a warning that unfunded tax cuts in a time of high inflation can cause markets to sell off UK bonds and make it harder to finance future government borrowing. After 15 years of ultra-low interest rates and little concern about rising debt, it is a reminder that …
In February 2022, western economies imposed sanctions on Russia in response to the invasion of Ukraine. These sanctions were wide-ranging including banning exports of many goods to Russia, freezing Russian foreign reserves and recently the EU has proposed banning Russian oil exports. In response, Russia has retaliated by cutting off gas supplies to Europe causing …
Interest rates are a tool of monetary policy. When the economy is overheating, the Central Bank can raise interest rates to cool demand and avoid an inflationary boom. In an ideal world, the Central Bank would make small adjustments in interest rates to fine-tune the economy and avoid booms and busts, but the situation the …
In recent weeks, the Pound Sterling has fallen – losing value against the dollar and other currencies. This year, the Pound has fallen over 16% against the dollar and 7% on a trade-weighted index. In Summary A falling Pound makes: UK imports become more expensive and UK exports more competitive. A falling Pound tends to …
Politicians often promise tax cuts can lead to higher productivity, higher economic growth, and even pay for themselves through a boost to long-term incomes. These promises may chime with the electorate who tend to prefer promises of tax cuts. But, do tax cuts really increase economic growth? There are two impacts of lower tax. Increasing …
Earlier this year, the World Bank warned up to 40 nations are at risk of defaulting on their sovereign debt. Already Sri Lanka, once hailed as an economic jewel, has badly defaulted as the country slides into economic turmoil. But, the bank warns many others, such as El Salvador, Ghana, Tunisia, Egypt, Kenya and Argentina …
The UK is heading for an energy crisis this winter, with average bills set to rise from £1,100 per year to at least £3,600. And with the possibility of prices rising to over £5,000 in January 2023. The lowest income families may see energy costs rise from 7% to 24% of income. (Link) For better-off …