Morning Brief – Central Banks and Cost of Borrowing Drivers

Humphrey Percy
Chairman and Founder
Wed 1 Feb 2023

Central Banks and Cost of Borrowing Drivers

The two principal levers used by central Banks are monetary policy and the setting of interest rates and the management of their balance sheets. With a move towards tightening ie higher interest rates and the reduction in balance sheet holdings, the snag is that despite some encouraging signs that inflation may have been brought in part under control, it remains high-as we wrote last week. The trend as we know is for Central banks to have pushed up interest rates quite aggressively led albeit belatedly by the Federal Reserve. At present many commentators are describing the interest rate picture as having peaked, whereas the implication of the sheer size of those balance sheets and the inflationary picture rather suggests that interest rates will have to be kept higher for longer-so more of a plateau than a top. This is the week when the Central Bank rate rising tide goes out and we shall see who is wearing those inflation fighting swimming trunks- or not. EUR/USD 1.0850.


A headline grabbing loss by Norway’s Wealth Fund: USD 164.4 billion. Norway’s citizens can sleep if not easy but certainly unruffled on this result as it needs to be viewed in the context of 1. The previous excellent results.2. The overall size of the fund. 3. The fact that with oil prices high and slated to go higher later in the year, Norway will benefit.

USD/NKR 10.06.

UK Mortgage Approvals

Those who watch the UK housing market avidly(pretty much all UK homeowners) should be aware that excluding the pandemic, mortgage approvals are at their lowest level since 2009 ie post financial crisis. With this clear signal on a rapidly cooling housing market, as well as further interest rate hikes, the signs are that sellers should hasten and buyers should be cautious-in the near term at any rate. GBP/USD 1.2295. 


Furrowed brows as to why Tesco sees value in UK card and stationery shop Paperchase that went into administration only to be snapped up by Tesco minus its 106 outlets. Presumably the strategy is a low cost opportunistic play with the merchandise having a low additional marginal cost when sold in Tesco stores. Bearing in mind Tesco currently has a thin card and stationery offering, this may be an argument despite the Paperchase product range being nowhere near as good as Clintons.

Heart Of Glass: it’s the way you tell ‘em

Once global icon NYC chanteuse Debbie Harry of Blondie had substituted the words “Pain in the Arse” with “Heart of Glass” in this 1979 number, it ensured both radio play and subsequent mega success. Here it is:

Once I had a love and it was a gas
Soon turned out had a heart of glass
Seemed like the real thing, only to find
Mucho mistrust, love’s gone behind

Once I had a love and it was divine
Soon found out I was losing my mind
It seemed like the real thing, but I was so blind
Mucho mistrust, love’s gone behind

In between
What I find is pleasing and I’m feeling fine
Love is so confusing there’s no peace of mind
If I fear I’m losing you. it’s just no good
You teasing like you do

Once I had a love and it was a gas
Soon turned out had a heart of glass
Seemed like the real thing, only to find
Mucho mistrust, love’s gone behind

Lost inside
Adorable illusion and I cannot hide
I’m the one you’re using, please don’t push me aside
We coulda made it cruising, yeah

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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