How falling oil prices have muddied monetary policy waters

5 November 2014

Expectations of the timing, and extent, of future Bank of England rate rises have changed significantly since the summer. This has coincided with lower inflation readings and a sharp decline in the oil price.  At Newton, our focus on our debt burden theme has led us to doubt whether a policy of low interest rates and forced asset inflation, which aims to drag spending from the future into the present, could create a sustained upswing in nominal demand. Could further evidence of deflationary pressures see investors begin to consider if the next policy move will, in fact, be greater stimulus?

 

Peter Hensman, Newton

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