Sterling drifts across the Atlantic

Article Abstract:

US financial markets now have a significant impact on the UK. This situation has wide-reaching repercussions for the prospects for sterling and interest rates in the UK. It seems likely that the dollar will remain firm throughout the rest of 1999, and this makes it unlikely that the value of sterling will fall. This in turn indicates that the Bank of England's Monetary Policy Committee could reduce interest rates further. However, base rates are set to rise to 6% in 2000.

Comment:

Could reduce interest rates further if the dollar remains firm through 1999

United States, Administration of General Economic Programs, International economic relations, Intnl Monetary & BOP Programs, Bank of England, Forecasts and trends, Column, Interest rates

Why devaluation is the right way

Article Abstract:

Measures of competitiveness show how sterling was overvalued against ERM countries to reduce inflation. The tenability of the new exchange rate must be reinforced. A domestic demand-led recovery would cause inflation or huge trade deficit, so supply should lead recovery. Possibilites could be to reduce VAT and to make the Bank of England independent. Government policy should be to improve labour markets, review property contracts and regenerate private housing rental.

Measurement, Economic policy, European Monetary System, Currency devaluation, Devaluation (Currency)

UK: STRONG POUND MEANS POOR INTERNATIONAL TRADE

Article Abstract:

The Engineering Employers Federation has warned that the strength of the pound could be detracting from international mergers and investment as UK market share has been lost to Euro area exporters. Economists do believe that the pound can remain high for much longer, although depreciation may well prompt the Monetary Policy Commission to put up interest rates.

Exports of Goods & Services, Brief Article, International trade, Foreign exchange rates