John Clarke

Why the MPC was right to increase its Quantitative Easing Needed to offset declining net lending to companies and households 18- Aug -2009
Yesterday’s decision by the Bank of England’s Monetary Policy Committee to expand its programme of asset purchases by an additional £50bn over the next three months to £175bn surprised most commentators, especially with the data releases over the past month or so having taken a turn for the better. Trying to make sense of the Monetary Data 9- Jun -2009
Good and bad news in the April Bank of England lending and money supply figures Welcome to the brave new world of Quantitative Easing 6- Mar -2009
MPC cuts another half point off Bank Rate & announces a £75bn Asset Purchase Programme Quantitative easing gets the green light from the Bank of England 13- Feb -2009
The February Bank of England Inflation Report, and Governor Mervyn King’s press conference, was remarkable for a number of reasons. First, the downward revision to the Bank’s central economic growth projection was the largest on record. As recently as November, the Bank had predicted growth would average -1.3% in 2009, but in yesterday’s Report this was slashed to -3.0% (on the assumption of constant 1% interest rates), although a sharp snap back is then expected in 2010 with growth averaging 2.7%. Within this, the Bank expects the four quarter change in real economic activity to drop to -3.9% in the second quarter. This compares with a low of -1.9% in the November Report. What’s more Mr King said that the risks surrounding the forecasts were stacked heavily to the downside. Indeed, in its worst case scenario, annual GDP growth could drop close to around -6% (see figure 1). UK Interest Rates hit an all time low of 1.00% 5- Feb -2009
As expected, the Bank of England’s Monetary Policy Committee today reduced the official Bank Rate paid on commercial bank reserves by another 50 basis points to just 1.00%. This brings the total easing since October, when Bank Rate stood at 5.00%, to 400 basis points. As the chart shows this is the most aggressive easing of monetary policy since 1992 when, in the aftermath of sterling’s exit from the Exchange Rate Mechanism, official rates were slashed from 10% in September (with a one day spike up to 12%) to 6% by January. Background to the Pre Budget Report 26- Nov -2008
What a difference six months makes. In his first Budget proper as Chancellor (although he delivered the PBR in 2007), Alistair Darling predicted that after 1.75-2.25% in 2008 economic growth would accelerate to 2.25-2.75% in 2009. MPC Slashes Bank Rate to 3% 12- Nov -2008
Although we said in the last issue of Economic Data Roundup that the risk to the consensus forecast of a half-point bank rate reduction today was that “an even larger cut could be forthcoming”, the Monetary Policy Committee’s decision to slash interest rates by 150 basis points came as a massive shock. UK economy contracts by larger than expected 0.5% in q3 31- Oct -2008
That the UK economy would show a contraction in the third quarter had already been universally discounted. What was not expected, however, was that the first outright decline in national income since the second quarter of 1992 would be as large as 0.5%, more than double the central market expectation. Where now for global equities? 10- Oct -2008
The belated decision by the US House of Representatives to do what it should have done at the end of September – namely ratify the rescue package for the US banking sector (the Troubled Asset Relief Plan) – was supposed to put a floor under banking shares by removing the so-called “toxic” mortgage-related assets from the banks’ balance sheets.  Equity markets after Lehman Brothers and Merrill Lynch 17- Sep -2008
Just when investors were beginning to believe the worst of the financial market turmoil might actually be over (hence the run up in the FTSE 100 index to 5636 at the end of August), the credit crunch goes and claims its biggest casualties yet.  Weak Q2 GDP figures open the door for lower interest rates 29- Aug -2008
Following the release of the June industrial production figures, it was always likely that the preliminary second quarter GDP figures would be revised down a shade.  Surprise, surprise – the US consumer saves all of Bush’s tax cuts and still continues to spend 4- Jul -2008
The May US personal income and outlay figures published at the end of last week told us two things. First, when the US consumer is suddenly “given” a cash windfall in this case, tax refund cheques equivalent to $400bn (at annualised rates) in May after $15.5bn in April, he or she is more likely to save it than spend it.  May Bank of England Inflation Report – Are interest rate cuts off the agenda until 2010? 21- May -2008
The May Bank of England Inflation Report made for sombre reading. Already a full percentage point above the government’s target at 3.0% in April, the Bank now expects inflation to rise to around 3.7% over the coming months, before falling back only slowly to 2.0% in 2010. Will rising UK inflation prevent lower interest rates? 25- Mar -2008
As expected, the headline measure of consumer price inflation rose further above target in February, climbing from 2.2% in January to 2.5%. March 2008 Budget Report 13- Mar -2008
As he stood to deliver his first Budget Statement, we couldn’t help feeling just a teeny bit sorry for Alistair Darling. Interpreting the mixed signals from the latest UK inflation data 14- Feb -2008
Monday’s figures showing producer output price inflation in January had risen to a 16 year high caused major concern within UK financial markets, with share prices falling back sharply as a result.  Time to Buy! 23- Jan -2008
The slump in share prices in Asia overnight, on top of losses in the UK and Europe, made for an uncomfortable opening in London this morning.  Market volatility may make 2008 a bumpy ride, but the rollercoaster is still on an upward trend. 17- Jan -2008
Since the beginning of 2008, conditions within equity markets have become even more difficult than at any stage since the credit crisis started to bite back in the summer. Is recession in 2008 now inevitable? 16- Jan -2008
The deepening crisis in the credit markets and the “implosion” of the US real estate sector have convinced many commentators that a recession is now inevitable in the US in 2008.  UK Bank Rate cut by a quarter point as MPC focuses on growing downside risks to the UK economy 11- Dec -2007
Views within financial markets on the outlook for the economy and inflation have fluctuated wildly during the course of this year. Fears over downturn heightened by October lending figures 29- Nov -2007
This morning’s Bank of England figures on net lending to the UK personal sector in October made for interesting reading. Equity seas still choppy, but calm is on the horizon 23- Nov -2007
Although conditions in world equity markets remained highly volatile in October, most of the major indices still managed to make progress.   Chaos in credit markets 29- Aug -2007
Evidence that the problems in the US subprime mortgage market were spreading to other parts of the economy have taken their toll on world equity markets over the past month or so. Another hike like base rates - but is 5 1/2% the peak? 5- Jun -2007
Unlike its previous two increases, yesterday’s decision by the MPC to raise interest rates by a further quarter point had been fully expected. Suggestions of a return of pricing power overblown 13- Apr -2007
In an article in the Sunday Times on 1 April, David Smith, the paper’s Economics editor argued that there were mounting signs of companies “flexing their muscles to push up prices”. March Budget 2007 21- Mar -2007
In his first Budget in 1997, Gordon Brown surprised financial markets by granting operational independence – essentially responsibility for setting interest rates - to the Bank of England. Shanghai Surprise 1- Mar -2007
The news that shares in Shanghai had fallen more than 9% - their biggest one day decline in more than a decade – sent most major global equity markets sharply lower yesterday. What does the January “Philly Fed” Survey tell us about the US Economy? 21- Jan -2007
Yesterday the Philadelphia Federal Reserve reported, in its Business Outlook Survey, that its current general activity diffusion index had slumped from -1.6 in December to -20.9 in January, the lowest since October 2001.  MPC raises interest rates to 5.25% 12- Jan -2007
Today’s decision by the Bank of England’s Monetary Policy Committee took financial markets by surprise, at least as regards its timing. Does September’s fall in the Philly Fed Survey mean the US economy is heading for recession? 26- Sep -2006
Fears that the US economy is heading for a hard landing were rekindled by the news that the Philadelphia (Philly) Federal Reserve’s current activity index had fallen sharply from 18.5 in August to -0.4 in September, the first negative reading since April 2003. MPC raises interest rates by a quarter-point to 4.75% - Inflation worries overdone 3- Aug -2006
The Bank of England’s decision today to raise interest rates by a quarter-point to 4.75% - precisely one year after it cut them by the same amount – came as something of a surprise to financial markets despite the fact that short sterling futures have been fully discounting two quarter-point hikes in the next 12 months for some time. US core consumer prices – higher rates now guaranteed? 15- Jun -2006
Overall US consumer prices rose by 0.4% in May, just as financial markets had been expecting, with the rising cost of energy, which climbed a further 2.4% on the month (with gasoline prices rising 4.8%) again the main factor putting upward pressure on the index.