{"id":3150,"date":"2011-01-26T12:22:37","date_gmt":"2011-01-26T12:22:37","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=3150"},"modified":"2025-03-27T15:49:11","modified_gmt":"2025-03-27T15:49:11","slug":"uk-economy-wont-double-dip-but-sterling-could","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=3150","title":{"rendered":"UK economy won&#8217;t &#8220;double dip&#8221; but sterling could"},"content":{"rendered":"<p>Bank of England Governor Mervyn King now expects CPI inflation to reach 4-5% over the next few months. Even if Drs Sentance and Weale are able to convince a majority of the MPC (presumably not including the Governor) to vote for tightening, Bank rate is unlikely to rise beyond 1%. The real level of Bank rate, therefore, is heading deeper into negative territory and could reach minus 4.5% &ndash; the lowest since 1977.<\/p>\n<p>Real policy rates moved from positive to negative in 1970 and again in 1974, with both movements followed by a large fall in the effective exchange rate &ndash; see first chart. The two currency declines were separated by a year-long period of stability, similar to the recent sideways movement. The second chart superimposes the fall in sterling from a December 1971 peak on the recent decline.<\/p>\n<p>Will increasingly negative real rates scare off foreign investors and lead to a 1975-style second leg down for sterling, thereby further boosting import prices and entrenching the current inflation overshoot?\ufeff<\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" style=\"width: 680px;\" src=\"\/storage\/chart1_26-01-2011.gif?__SQUARESPACE_CACHEVERSION=1296046140190\" alt=\"\" \/><\/span><\/span><\/p>\n<p>&nbsp;<br \/><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" style=\"width: 680px;\" src=\"\/storage\/chart2_26-01-2011.gif?__SQUARESPACE_CACHEVERSION=1296046163107\" alt=\"\" \/><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bank of England Governor Mervyn King now expects CPI inflation to reach 4-5% over the next few months. Even if Drs Sentance and Weale are able to convince a majority of the MPC (presumably not including the Governor) to vote for tightening, Bank rate is unlikely to rise beyond 1%. The real level of Bank [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-3150","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3150","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3150"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3150\/revisions"}],"predecessor-version":[{"id":5459,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3150\/revisions\/5459"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3150"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3150"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3150"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}