Carney rips his shirt off – BBC News

The Monetary Policy Committee has thrown the kitchen sink at the stuttering UK economy. But the governor knows he’s not Superman.

Source: Carney rips his shirt off – BBC News

The cut in the bank rate, the first in 7 seven years and at the lowest rate in history, demonstrates that the Bank of England is not particularly confident about UK economic prospects. With falling confidence indicators, such as the Purchasing Managers’ Index (PMI), as a result of the uncertainty caused by Brexit, the Bank has acted quickly to loosen monetary policy to encourage spending by both households and firms. Lower rates reduce the incentive to save and encourage borrowing as the reward for the former falls and the cost of the latter decreases. However, will a 0.25% cut make a real difference? Rates were already at a historic low – will we see negative rates, used by Japan, ECB, Sweden, for this first time in B of E history? Either way, growth forecasts have been slashed, as predicted by most economists prior to the Brexit vote. In the short-term, at least Brexit appears to be making the country worse off than it would have been otherwise. Long-term, well time will tell.

Japan issues a 10 year government bond with a negative yield

The Japanese bond market had an historic day on Tuesday, selling 10-year bonds at a negative rate or yield. The news was the front page headline in the FT

Source: Japan issues a 10 year government bond with a negative yield | Economics | tutor2u

Speculators pay to lend to the Japanese government. Expectation that they will make a profit by selling the bond to the BoJ at some point in the future.

Unfamiliar ways forward | The Economist

Policymakers in rich economies need to consider some radical approaches to tackling the next downturn

Source: Unfamiliar ways forward | The Economist

With the global economic outlook gloomy, interest rates at record lows and high levels of public debt, policymakers will have to be creative should they decide the economy needs a ‘kick’.

Low and behold | The Economist

Another year of low prices will create strains in the world economy

Source: Low and behold | The Economist

From oil supply in Saudi Arabia to interest rates in the US via the Chinese exchange rate – a wonderful illustration of the interconnected nature of economics. A must read.