Investment newsletter - August 2016

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Investment Newsletter August 2016

Emergency measures? Mike Deverell Investment Manager

In March 2009 the Bank of England cut its official interest rate to a then record low of 0.5%.

easy money to banks on the proviso they lend it to consumers and companies.

At the same time as doing so they announced stimulus known as quantitative easing (QE). These were seen as emergency measures in the depths of the financial crisis, designed to stop the UK plunging into a deep depression.

The size of this package shows how worried the MPC is about the UK economy after the recent vote to leave the European Union.

At that time, few would have predicted that seven years later that interest rate would still be at those emergency levels. Fewer still would have predicted that the next move to rates was to drop them even lower. At its August 2016 meeting the Bank’s Monetary Policy Committee (MPC) cut rates to 0.25%. They also announced more QE allowing the Bank to purchase up to £70bn of gilts and corporate bonds, as well as providing

There has been some criticism that the likes of the Bank of England are “talking the economy down” by setting out their concerns so explicitly. After all, “Brexit” hasn’t yet happened! However, in our view it is right that they take pre-emptive action rather than waiting for a possible recession before acting. Recessions take hold not just because of what is happening but also concerns about the future. Businesses become cautious and hold back on investment.

Equilibrium Asset Management LLP (a limited liability partnership) is authorised and regulated by the Financial Conduct Authority. Equilibrium Asset Management is entered on the Financial Services Register under reference 452261. The FCA regulates advice which we provide on investment and insurance business; however it does not regulate advice which we provide purely in respect of taxation matters. Copyright Equilibrium Asset Management LLP. Not to be reproduced without permission.


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