Unsurprisingly, no concrete policies to sort out the Eurozone crisis came out of the G20 meeting of the world’s leading economies last week. But a renewed commitment to keeping the euro intact and a 130 billion euro growth stimulus package agreed at the meeting of Eurozone leaders did help a bit. Borrowing costs fell a little, but it’s not a game-changer. The markets are still very worried about Spain (and so are fans of German, Italian and Portuguese football!). On the other side of the Atlantic fears that the US recovery is slipping led the Federal Reserve to activate a second ‘Operation Twist’ in an attempt to rev things up a bit. It’s not alone in this desire. Judging by the minutes from the last Monetary Policy Committee (MPC) meeting it won’t be long before the Bank of England joins the party with more quantitative easing.
UK inflation continues its slide. The consumer price index rose 2.8% in May, down from the 3% rate in April. Cheaper petrol had a big effect, as lower crude oil prices filtered their way through to the forecourt. The cost of food also helped, as big price rises last year weren’t repeated. May’s reading is the closest inflation has been to the Bank of England’s 2% target for two and a half years. This is good news for savers and everyone who has seen their income fail to keep pace with prices. But it doesn’t mean the squeeze on consumers is over. The price of essentials, such as gas and electricity, are still 15% and 8% higher respectively than last year.
MPC minutes show further shift towards easing. Another dose of quantitative easing was a close run thing earlier this month. Four of the nine members of the Committee voted in favour of more easing. The continued deterioration in the domestic and global economic outlook, coupled with a further retreat in inflation, increases the likelihood that a majority will vote for more easing, maybe as soon as July
Backing Germany or Spain?
26 Tuesday Jun 2012
Posted economy
in