Friday, September 21, 2007

Fundamentals are strong! but really?

UK GDP growth to slow to 1.7 pct in 2008, BoE to cut rates in Feb

Lehman Brothers said it is now forecasting GDP growth to be 1.7 pct in 2008, down from its earlier forecast of 2.3 pct. Meanwhile it said it expects the Bank of England to cut interest rates in February and May next year. 'The softer outlook for next year justifies 50 basis points of Monetary Policy Committee rate cuts ... we would not rule out earlier moves if there is further negative news from financial markets or the banking sector,' said Alan Castle, UK economist at Lehman. On the inflation front, Lehman said it now sees 2008 CPI inflation at 2.2 pct, down from the earlier forecast of 2.4 pct." Is this the strong oulook that underpins house prices? And how about the currency?

Posted by confused76 @ 12:19 PM (962 views)
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5 thoughts on “Fundamentals are strong! but really?

  • Hang on. They’re forecasting CPI inflation at 2.2% – ie over target – and at the same time forecasting two interest rate cuts? Is it me, or does that not make sense?

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  • tyrellcorporation says:

    It’s the way they operate Pelethar. Inflation can creep up to 2.9% and bugger all happens, as soon as it drops below 2% they talk about IR cuts. They like to keep inflation at it’s imaginary level of about 2.8% so it erodes debt without looking like it’s out of control – even though we all know it’s probably running at around 6%.

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  • The CPI Con trick in a nutshell !!!!!

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  • But even that’s sleight of hand in itself. The target is to hold inflation between 1 and 2%. So if it’s at 1.9% it is absolutely NOT below target. They are now being disingenuous in their interpretation of a fabricated statistic, which is just ridiculous. It makes me seethe!

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  • “it expects house prices to flat-line …”

    … for the first time in history after a boom, there will be no bust. It will be a new paradigm.

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