Thursday 29 September 2016

The Punt: Carney's rate cut dilemma

Published 15/02/2016 | 02:30

Geoff McGrath. Photo: Con O'Donoghue
Geoff McGrath. Photo: Con O'Donoghue

Mark Carney is under pressure he didn't expect just 12 months ago. Then he was talking about an interest rate rise in the first three months of 2016 - what would have been the first since the financial crash.

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How times have changed. Any chance of a rate rise this year from the Bank of England seems to be out the window. Now there's even speculation of a cut, according to Bloomberg.

UK investors now are harking back to 2013 and increasing bets the bank will need to do more to stimulate the economy.

The last time traders were this certain the central bank would cut its benchmark rate was almost three years ago, Bloomberg reported, when a minority of officials, including then-governor Mervyn King, voted to expand the asset-purchase programme.

Ultimately, no more stimulus was added. Still, back then unemployment was close to 8pc, wage growth was stuck around 1pc and King was arguing the recovery wasn't strong enough to be sustainable.

Now, under Carney's stewardship, the jobless rate has dropped to 5pc and wage growth has almost doubled. Still, a financial-market rout, fears of a global slowdown and Britain's upcoming referendum on the EU are clouding the outlook.

While Carney and his colleagues on the Monetary Policy Committee insist the next move is more likely to be up, and the majority of economists see an increase before the end of the year, futures contracts continue to suggest the opposite.

Looking on the bright side of life

After a bleak week on the markets, a London think tank has brought out an upbeat report, forecasting that investors have it all wrong about the global economy, and particularly on China, oil and the US economy.

CEBR (The Centre for Economics and Business Research) said the BRICS were broken. China may follow Russia and Brazil into recession, leaving only India standing, and stock markets are tumbling - yet there are still strong reasons to be positive.

"Our view on China is that it is not collapsing quite yet - it is certainly slowing, but the most important development is rebalancing.

"The Chinese government clearly signalled both intentions far in advance. The next cyclical downturn, however, could see the world's second-largest economy fall into recession.

"But although China could slip into recession at some point, this will largely be for cyclical and restructuring reasons, rather than the end of its adventure into commerce."

CEBR said the effect of low oil prices had been overplayed and that the weak data out of the US was a "blip".

Isn't it nice to have some positivity for a change? Let's just hope it's right.

Geoff's star is on the rise

Core Media has appointed Geoff McGrath as the new managing director of Starcom, and director of transformative change within the media group.

McGrath, inset, was managing director of ad agency Target McConnells and has 20 years of experience in the business, including marketing communications skills.

McGrath replaces Craig Farrell, who will take up a new post within Core Media as managing director of ZenithOptimedia.

Core Media chief executive Alan Cox said McGrath's appointment was a "crucial step" in the evolution of the business.

"We are in the process of transforming Core Media into a group that excels right across the full spectrum of marketing communications needs," Cox said. "Geoff will be a key driver in helping us to achieve that ambition.''

McGrath said he was looking forward to the challenge. "This is an exciting time in Core Media," he said.

"It was not an easy decision to leave Target McConnells after 12 fantastic years there. It is a great agency and I'm very proud of all that Gary Brown and myself have achieved and I wish them continued success.

"All companies benefit from change and I'm excited about what lies ahead in Starcom."

Irish Independent

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