What does the Bank of England’s decision on Thursday to leave its interest rate at 0.5% tell us?
- There is no economic growth across the pond, same as the US.
- The UK banks are still not right with their balance sheets and need to be supported and need more time to repair their impairments.
- Since global central banks work in unison, the Federal Reserve will not raise rates in Sept.
IMF chief Christine Lagarde has told these bankers that 2015 was not the year to raise rates, and yet some still believe there was drama before the announcement Thursday in London.
Taking the playbook for what Fed chief Janet Yellen will say at the September press conference after announcing that rates will hold steady, BoE head Mark Carney cited a strong British pound and cratering commodity prices as a reason to not raise rates.
The commodity price slide has all central bankers fearful of disinflation, since consumer spending is depressed despite lower fuel costs.
I see it as a global recession with depressed economic growth and investors putting their money into sovereign debt for safe keeping that is behind a stronger pound and dollar.
The two currencies — pound and dollar — are not strengthening on the prospects of future growth, but the fear of a global recession. A huge difference in market psychology.
What’s my proof of a standstill Fed in Sept. off of the BoE rate call? US equities soared in pre-market on the news. Enough said.