Tag Archives: Jennifer Ryan

Barker Says BOE Should Print Money

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And yet another central banker who doesn’t understand monetary operations…

Has to be a new low for the BOE.

Barker Says BOE Should Print Money as U.K. Recession Worsens

by Jennifer Ryan and Brian Swint

Mar 13 (Bloomberg) — Bank of England policy maker Kate Barker said the bank’s decision to buy assets with newly created money is necessary to prevent deflation as Britain’s recession shows signs of worsening.

Printing money “is the best course in order to achieve our objective of keeping inflation to target in the medium term.” “The downside risks to growth, and therefore to inflation, identified in the February inflation report were in danger of crystallizing,” she said. Barker said the impact of the reduction in the benchmark to lower levels had become “successively reduced” with each cut, and lower rates on their own would be insufficient to revive growth.


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EU Finance Chiefs Rebuff US Calls to Boost Economic Stimulus

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Yes!

Europe Snubs US Calls for More Stimulus Before G-20

by Jennifer Ryan and Agnes Lovasz

Mar 10 (Bloomberg) — European finance ministers rejected calls from the U.S. to do more to battle the economic crisis, saying stimulus plans already in place need time to work.

“Recent American appeals insisting that the Europeans make an additional budgetary effort to combat the effects of the crisis were not to our liking,” Luxembourg Finance Minister Jean-Claude Juncker said yesterday after leading a meeting of euro-area finance chiefs in Brussels. “We want to see what the effect of the recovery package is going to be.”


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UK budget deficit to the rescue

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The combination of ‘automatic stabilizers’ and proactive fiscal will reverse the downturn in the UK.

Unfortunately they waited too long for the proactive adjustment so they are suffering with the forces that drive the automatic stabilizers-

Falling revenues and rising transfer payments:

U.K. Budget Deficit Widens as Recession Saps Taxes

By Jennifer Ryan

The U.K. budget deficit widened as the gathering recession pounded tax receipts, and analysts warned of worse to come as the economic slump deepens. The 37 bln-pound shortfall ($55 bln) in the first seven months of the fiscal year was the largest since records began in 1993, the Office for National Statistics said in London today. The deficit in October was 1.38 bln pounds, the first shortfall for the month since 1994 and more than triple the 400 million pounds forecast by economists in a Bloomberg News survey.

Chancellor of the Exchequer Alistair Darling is planning a package of tax cuts and infrastructure projects to limit the recession, forecast by the Bank of England to extend well into 2009. Tax increases or spending restraint will eventually be needed to bring down the level of borrowing, economists say.

“The likelihood is that the deficit will continue to escalate,” said Philip Shaw, chief economist at Investec Securities in London. “Patching up the public finances is going to be very, very hard work.”

Little more than half way through the fiscal year, the shortfall through October is just short of the 43 bln pounds forecast by Darling in March for the full fiscal year, which ends on March 31, 2009. In the same seven months last year, the deficit was 20.1 bln pounds. Darling will use his annual pre-budget report to Parliament on Nov. 24 to revise his economic forecasts. Economists in a Treasury survey this month predicted the deficit will reach 65 bln pounds this fiscal year and almost 90 bln pounds next year, or 6 % of national income, the most since 1995.


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U.K. mortgage approvals drop to least since 1999

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U.K. Mortgage Approvals Drop to Least Since 1999

By Jennifer Ryan

(Bloomberg) U.K. mortgage approvals dropped in December to the lowest in at least nine years, and consumer credit fell, threatening the outlook for economic growth.

Lenders granted 73,000 loans for house purchase, down from 81,000 in November and the least since records began in January 1999, the Bank of England said in London today. The median forecast in a Bloomberg News survey of 24 economists was 79,000. Lending on personal loans and overdrafts fell to 265 million pounds ($530 million), the least in 15 years.

Banks are tightening credit standards after contagion from the U.S. subprime mortgage market collapse, the Financial Services Authority said yesterday. Less access to credit for Britons with record debt may further slow consumer spending and a weakening housing market, adding to the case for an interest rate reduction by the Bank of England as soon as next week.

“The household sector was clearly under some kind of pressure at the end of 2007,” James Shugg, an economist at Westpac Banking Corp. in London, said in an interview on Bloomberg Television. “The U.K. housing market is embarking on a much slower growth period.” He predicted further interest rate reductions after a quarter-point cut last month.

In a separate statement, Prime Minister Gordon Brown reappointed central bank Governor Mervyn King to serve another five-year term. King accepted the position, saying in a statement that he looks “forward to working hard with my bank and MPC colleagues on the economic and financial challenges that face us all.”

Consumer Credit
The central bank’s report today showed consumers borrowed less on unsecured credit as they faced repaying a record 1.4 trillion pounds in debt and banks curbed lending to them. Net consumer credit fell to 557 million pounds in December, less than half the previous month’s total.

“A significant minority of consumers could experience financial problems because of their high levels of borrowing,” the FSA, the U.K.’s financial regulator, said in its risk outlook report yesterday. “A growing number of consumers are likely to experience debt repayment problems in 2008.”

The average cost for a fixed-rate mortgage maturing in the next 12 months and switching to a variable rate will rise by about 210 pounds per month, creating a “serious impact on the affordability of the loan,” the FSA said. The increase will affect about 1.4 million home loans.

Subprime Losses
Britons face higher home loan costs after banks around the world posted at least $133 billion in losses from the collapse of the U.S. subprime mortgage market.

The average rate offered by lenders on a mortgage for 95 percent of the price of a property, fixed for 24 months, rose to 6.53 percent in December from 6.44 percent, the central bank said Jan. 10. The central bank’s credit conditions survey showed banks plan to limit access to all debt in the first quarter.

“There is a risk that some consumers could find it difficult to meet their credit commitments due to tighter lending standards for both secured and unsecured credit,” the FSA said.

All 30 economists in a Bloomberg News survey forecast the Bank of England will cut interest rates a quarter point to 5.25 percent on Feb. 7 as growth slows and the housing market stalls.

U.K. retail sales rose at the slowest pace in 14 months in January, the Confederation of British Industry said yesterday.

House prices fell for a fourth month in January, Hometrack Ltd. said Jan. 28. U.K. real estate professionals said December was the worst month for the housing market since the aftermath of Britain’s last recession in 1992, according to a Jan. 16. report by the Royal Institution of Chartered Surveyors.

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