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Boe Mpc's Weale: Uk Faces Sig Risk Of Double-Dip

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LONDON - Britain faces a "significant" risk of a double-dip recession, according to Dr Martin Weale, the newest member of the Bank of England's Monetary Policy Committee.

Speaking to the Times newspaper on Monday, Weale said that he was unlikely to call for rate changes soon and described himself as "comfortable" with the current monetary policy stance.

Dr Weale attended his first monetary policy meeting this month and voted with the governor to hold both interest rates at 0.5% and its quantitative easing programme at stg200 billion.

In his first interview since taking up the post, Weale said he feared that the Bank's central outlook for growth of around 2.8% in 2011 and 3.2% in 2012 could be too optimistic.

The threats to a sustained recovery are a renewed surge in unemployment, further falls in house prices and a new banking crisis, Weale added.

Weale also noted that the Bank's latest economic forecasts, published in the August 11 Inflation Report, gave a one-in-ten outside chance of four-quarter long contractions in output in 2011 and 2013.

"The forecast is putting a significant chance on the economy contracting over a four-quarter period," he said.

Weale also warned that fears over the creditworthiness of sovereign debt could lead toa new crisis in the financial sector.

I'd say the double-dip is a 100% certainly myself.

GBP down to $1.5386.

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I'd say the double-dip is a 100% certainly myself.

GBP down to $1.5386.

The credibility of the BoE is seeping away before their eyes, yet they refuse to see it. If the Bank doesn't raise rates now when RPI is running 5% above base rate, then when would they ever raise rates?

Everything looks fine now, but when a crisis happens (e.g. oil price spike, drought induced food price increase, Con-Lib coalition collapses and sterling takes a dive, etc.) they'll have no credibility with the markets and will be incapable of doing anything other than raising rates to 10% or 15%. They're building up massive risks, and everyone in the press seems to assume that the risk comes without a price -- an exact replay of the sub-prime fiasco.

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the only argument to me is whther we ever came out of recession.

the Q4 0.1% 2009 always looked errrrrrrrr...........

It's a real shame they manipulated the situation to allow us to come out of recession as now we simply face going back in. Still with house prices so damn high there isn't a cat in hells chance of us forming a lasting recovery anyway. Money being tied up in bricks and mortar isn't money being spent productively in the real economy. The days of us having a freak show economy based on house flipping are now surely at an end...

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The double-dip threat is growing – what should investors do?

It's shaping up to be another 'risk-off' day.

Asian markets fell back this morning, as did the oil price. Both Japan's Nikkei 225 index, and the Vietnamese VN index are now in bear market territory for the year, having fallen by more than 20% from their second-quarter highs. Japan in particular, has been hobbled by the strong yen, which hurts the country's exporters.

Of course, all of this could change by the end of the day. We might be back to 'risk-on' by the time the US market closes tonight.

But in the longer run, I reckon it'll take at least one more big sell-off to shake the nerves out of this market...

It's no wonder the property market is slumping

With this sort of grim unemployment picture, it's perhaps no surprise that things are looking gloomy for the housing market too. The trouble is, in a consumer-based economy, the housing market and the broader economy feed off each other.

It's a well-rehearsed formula, and one we're only too familiar with in Britain. When house prices are rising, you get the 'wealth effect'. People feel confident with a big chunk of equity at their backs. When your annual house price increase amounts to more than your annual salary, you don't feel concerned about treating yourself a little. And why not? After all, you deserve it for being such a smart investor.

And of course, a buoyant property market means lots of business for people involved in that market. From delivery drivers to washing machine makers, everyone benefits from all the little transactions and purchases involved in moving home.


Edited by The Masked Tulip
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  • 441 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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