Stewart Robertson, economist at Morley, comments; Bank of England rate setters remain deeply divided.
Stewart Robertson, economist at Morley, comments; Bank of England rate setters remain deeply divided:
- For a second successive month the Bank of England (BoE)'s Monetary Policy Committee split three ways on whether to lower, maintain, or raise interest rates, as policymakers continued to grapple with the twin threats of rapidly cooling economic growth and rampant inflation.
- Governor Mervyn King, along with six of his eight colleagues, argued that the current policy was "broadly appropriate". For the majority, while the outlook for activity had worsened over the previous month, some build up in spare capacity was most likely going to be necessary to impel inflation back towards target.
In Morley's view, UK rates will stay on hold before tumbling sharply in 2009.
- With the central bank having earlier in August predicted consumer price inflation was likely to reach about 5% in the coming months before heading back below its 2% target in two years, rates appear to be on hold for some time. Having said that, activity numbers are likely to deteriorate sufficiently, with the economy likely to enter recession in the current quarter, to enable rates to tumble sharply in 2009. We believe rates will hit 4% by the end of next year, although there is a risk they will fall further, perhaps revisiting the 2003 low of 3.5%, without signs of a recovery by the second quarter.
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Notes to editors:
Unless otherwise stated the views expressed are those of Morley as at 15 May 2008. They should not be relied upon as indicating any guarantee of return from an investment in funds managed by us.
Morley
Morley is the UK-based asset management business of Aviva plc. Firms within the Morley group of companies manage £150bn (€191bn) from offices around the world as at 30 July 2008.
Morley manages both institutional and retail funds. It also acts as investment manager for a range of retail investment funds, marketed in the UK under the Norwich Union brand and in Europe under the Morley name. The property team manages in excess of £27bn (€35bn) of UK and European property assets.
Aviva Investors
On 28 February 2008, Aviva plc announced it was combining the majority of its asset management businesses to create a single, globally integrated asset manager to be known as Aviva Investors - to be launched formally in September 2008.Aviva Investors will be the global asset management business of Aviva plc, the world's fifth-largest insurance group.
Operating under a single brand with more than 1,300 employees in 15 countries across the UK, Europe, North America and Asia, and subject to regulatory approval, Aviva Investors will combine businesses in the UK (Morley), North America (Aviva Capital Management, MFM International, Aviva Investment Canada), France (Aviva Gestion d'Actifs), Australia (Portfolio Partners), Poland (CUIM Polska), Ireland (Hibernian Investment Managers) and Romania (CertInvest) and work in partnership with Delta Lloyd Asset Management in the Netherlands.