Daily Brief – Bank of England

Bank of England

As expected the BoE cut interest rates by 25bps yesterday. So far so good but then the BoE departed from the script. Flat economic growth up until the end of 2024 was less of a surprise but then a new forecast for inflation +3.7% and 2025 economic growth slashed from 1.5% to 0.75%. While the insipid growth forecast will encourage further cuts it is the inflation outlook that will curtail much of the potential benefit of those cuts. And that is before the likely increased tariffs from the U.S.A… not what Chancellor Reeves was hoping for in terms of growth nor inflation. GBP did not fare well suffering one of its largest falls in recent times.

GBP/USD 1.2390.

UK Government Energy Policy

In the pursuit of a clean energy policy it is the UK’s Minister Miliband’s official policy not to extract gas from the North Sea but instead to import LNG from abroad and from countries that are far from zealous in pursuing clean energy. Transporting that LNG means that on top of the emissions in producing the gas the shipping tankers also emit further carbon. Apart from the attraction of reducing its carbon footprint the UK could be energy self sufficient and have its own much cheaper energy. Then there are the resultant jobs and the accompanying investment that are foregone plus the transfer of wealth to the countries exporting their LNG to the UK. Sitting at the same Westminster cabinet table is the UK Chancellor advocating inward investment in the UK plus her drive for growth. Such is the Alice Through The Looking Glass World of the UK government 7 months in.

GBP/EUR 1.1960.

Official do Brasil 

High coffee prices have given rise to a new product that costs about one third of coffee beans. Official do Brasil justifies its coffee substitute that is made of powder that contains coffee flavouring, vegetable pulp and leaves on the grounds (sorry) that it caters for those who cannot afford coffee. So next time you go to a coffee bar it might be worth checking that they are using beans when you pay GBP3+ for your barista coffee.

EUR/USD 1.0365.

Growth

If Chancellor Reeves wants to see what a country near to home looks like where the economy is really growing rather than talking about it, she should look no further than Poland where 3.5% is forecast for 2025 and 3.3% for 2026. To answer her how question: Strong exports, robust domestic consumption, a favourable business environment and a commitment to economic stability. 

USD/JPY 152.08.

50 Ways to Leave Your Lover

49 years ago today in 1976 Paul Simon released this song which he self-depreciatingly described as a nonsense song. His fans did not agree and bought it in droves with the result that it stayed at Number One for 3 weeks.

The problem is all inside your head
She said to me
The answer is easy if you
Take it logically
I’d like to help you in your struggle
To be free
There must be fifty ways
To leave your lover

She said it’s really not my habit
To intrude
Furthermore, I hope my meaning
Won’t be lost or misconstrued
But I’ll repeat myself
At the risk of being crude
There must be fifty ways
To leave your lover
Fifty ways to leave your lover

You just slip out the back, Jack
Make a new plan, Stan
You don’t need to be coy, Roy
Just get yourself free
Hop on the bus, Gus
You don’t need to discuss much
Just drop off the key, Lee
And get yourself free

She said it grieves me so
To see you in such pain
I wish there was something I could do
To make you smile again
I said I appreciate that
And would you please explain
About the fifty ways

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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