Pound Falls Against Euro
Wednesday 5th March saw the British pound fall to a new low against the Euro, coinciding with a further drop in consumer confidence.
In addition, recent figures produced by the Recruitment and Employment Confederation have shown a decline in the demand for permanent staff as it fell to its lowest level in five years.
At close of business Tuesday the Euro rose to 76.87, reaching its highest ever rate against British sterling since it was introduced back in 1999. The pound also fell to a one week low against the US dollar, closing at $1.9784.
The Nationwide consumer sentiment index for last month February reported a 3 point decline to 78 marking the lowest level since May 2004. It has been suggested that consumers are now becoming ever more concerned about rising fuel and food prices. As a result they are adopting a much more thrifty approach when it comes to their personal finances.
Already we have seen tighter lending conditions introduced within the finance markets. Both credit card companies and mortgage lenders are now either cancelling their 'high risk' customer's accounts or dropping the products that may put them at risk.
Despite the Bank of England's Monetary Policy Committee (MPC) meeting today, 6th March, to discuss the interest rates, any further cut looks highly unlikely. Worries about inflation continue to outweigh concerns about the flagging housing market. The current base rate stands at 5.25% following the MPC's decision to cut rates twice in the past four months.
An economist said the Bank would eventually cut the interest rates but not yet. He said,
"We judge that the growth outlook will prove to be the bigger concern for policymakers but, in the very near term, the upside inflation pressures could dominate, consistent with a no-change decision at this week's MPC meeting."
Analysts predict the Bank's policy makers will reduce the borrowing cost an additional 3 more times to 4.5% by the end of the year as economic growth slows. However, it is clear that the pace for any further reductions will be delayed by rising food and energy prices since the MPC’s main point of focus is that of inflation.
Published on March 6, 2008
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