Governor of the Bank of England blames China for continuing UK low interest rates

 Today is Tuesday 19th January 2016 and we are going to briefly cover the Governor of the Bank of England – Mr Mark Carney’s comments about the UK and World economy.
Last Thursday the Bank of England decided not to raise interest rates in the UK, noting volatility in global markets and highlighting a sharp fall in oil prices that are likely to keep inflation low.

Members of the Bank’s nine-member Monetary Policy Committee (MPC) voted eight to one to leave rates at 0.5%, where they have been since March 2009.

Today Mr Carney, expressed his views publicly for the first time since the FED raised their rates from 0.25% to 0.5% last month and conveyed the point that Britain is far more exposed than the US to weaknesses in the global economy, which will squeeze the export sector and prove a drag on inflation. “The world is now weaker and UK growth has slowed. This is no time to make a move”, Mr Carney concludes.

Much of the concern centres around China and its fall in growth to 6.9% announced yesterday its slowest rate in 25 years. With the Chinese reducing their interest rates some 5 times in the past year, with commodity prices such as iron ore, wheat and oil continuing to fall and the US attracting foreign currency investment as a result of a stronger dollar, the Governor supported not only to keep rates as they are, but will probably maintain these levels for some time to come. With a UK inflation rate of 0.2% and a target of 2% and the economy at best being fragile one can see why there is no appetite to raise rates.

Our conclusion is very clear, world economic growth is fragile and falling. Even the IMF have today cut its global growth forecasts for the third time in less than a year, predicting 3.4 percent growth in 2016 and 3.6 percent in 2017, both years down 0.2 percentage points from the previous estimates made last October; quoting a slowdown in China trade and weak commodity prices that are hammering Brazil and other emerging markets.







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