Raise interest rates to prop up the pound?

Generali

Thrugelmir wrote: »

Far stronger than Eastern and Southern Europe though.

Oh well that's alright then.

MiserlyMartin

Thrugelmir wrote: »

Euro fluctuates all the time. Since it was formed. £ has varied between €1.05 and €1.78. No one ever got uppity before while it gyrated around.

£ to euro rate was about here when it looked like Labour were going to win the last election. There was no such panic or concern in the media about that then. When the £ was nearly 1:1 with the Euro around 2009 did the media panic or even mention imports like oil, petrol costs then? No!, this is media hype stirred up by the biased BBC and bitter remain supporters to try to make people feel bad who can't accept a democratic result. Seeing as they voted remain they probably don't know what democracy actually is! The £'s value is rarely even mentioned these days on mainstream BBC news, it hasn't been for years. Its dumbed down news.

padington

Generali wrote: »

Do you mean 'in the EU'?

I suspect that we'll find that the UK has just made itself one of the weak countries. Still, time will tell.

Yeah, I suspect your are right but they're will be more blood pouring from some in Europe.

Something at least to distract the Sharks before Johnson slips with the knife again.

wotsthat

Thrugelmir wrote: »

Euro fluctuates all the time. Since it was formed. £ has varied between €1.05 and €1.78. No one ever got uppity before while it gyrated around.

I'm surprised you think it's that simple. Are you insulated from the decisions that determine where capital investments are made?

Everyone knows exchange rates fluctuate but capital investment is reduced when rates are erratic and volatile.

Factories don't lie idle waiting for a €1.05 exchange rate to turn on the widget machines and then shut down and import them when it's €1.78.

The Brexit process has caused uncertainty and looks like it'll continue to do so. Capital investment has/ will be affected which means we're probably going to be less able to benefit from favourable exchange rates going forward.

Garethgrew

The pound is going down not up, this means interest rates have to back up, they can't stay down here much longer.

Generali

Garethgrew wrote: »

The pound is going down not up, this means interest rates have to back up, they can't stay down here much longer.

Maybe, it's a matter of choices really. The BoE will probably accept a short term fall of 20% or more but ultimately the pound needs to be defended by people wanting to buy and hold UK assets. I guess there are two ways of looking at it, either the UK has seized the moment and freedom loving investors from across the world will be beating a path to the UK's door or the will recognise that there is a risk that !!!! knows what will eventuate from this and will want to be compensated with a better expected return for wearing that risk.

My money's on the latter.

Rinoa

Garethgrew wrote: »

The pound is going down not up, this means interest rates have to back up, they can't stay down here much longer.

Countries often benefit by so called 'beggar thy neighbour' policies where they artificially keep their currency undervalued.

The USA accuse China of this. It helps China growth at the expense of US trade deficit. Germany benefits from using the Euro whereas in reality if it had it's own currency it would be valued far higher.

I very much doubt the Chancellor is worried by the pounds current level.

Generali

Rinoa wrote: »

Countries often benefit by so called 'beggar thy neighbour' policies where they artificially keep their currency undervalued.

The USA accuse China of this. It helps China growth at the expense of US trade deficit. Germany benefits from using the Euro whereas in reality if it had it's own currency it would be valued far higher.

I very much doubt the Chancellor is worried by the pounds current level.

There's a benefit and a loss.

Exporters gain in the short term from a weaker currency as their products can be sold more cheaply abroad. Importers lose out because they have to pay more for internationally traded items.

In the longer term the evidence seems to show that inflation ends up eroding the export gains from a lower currency but the losses from imports being more expensive might be permanent or at least longer lasting.

I agree with the last part, a drop in the pound of a few percent is trivial although the fall of 12% before the Central Banks got stuck in was amazing (and probably terrifying if you crunched the numbers about what that would mean for food and petrol prices and family budgets). Longer term, Central Banks can't keep spending to prop up the quid. Either investors need to change their attitudes or interest rates will have to rise.

chris_m

Rinoa wrote: »

I very much doubt the Chancellor is worried by the pounds current level.

I suspect he's far more worried about whether he will be able to move next door after all.

Thrugelmir

Generali wrote: »

In the longer term the evidence seems to show that inflation ends up eroding the export gains from a lower currency but the losses from imports being more expensive might be permanent or at least longer lasting.

Inflation is benign currently.