Friday, September 21, 2007
Fundamentals are strong! but really?
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?