It was only just over a week ago that Mr Governor gave his prognosis and forward guidance; meant to calm us all down, so that we could rest securely in the warm glow of cheap mortgages and low borrowing costs for the next three years.
WHAT HAPPENED ??? We get a couple of bits of good news about the economies both sides of the pond, and wacko, according to the UK press, rates are going up next Monday at the very latest, stock markets are tumbling and life – so good last week – is now futile !!!
So, what has happened to interest rates to spark this – 10 year gilt yields rose a few basis points to about 2.8%, not exactly armageddon is it. A couple of facts here in this silliest of seasons; firstly, we all know that rates are going up at some stage, and that QE will end, it`s just a question of when – but basically, rates are not going up by much and not just yet, thank you. Secondly, there are profits to be taken in equities, and September/October are regular down periods, so to take some profit seems a reasonably smart move (ps. hearing some of that cash going into gold ).
So, lets not get ahead of ourselves here, sure the stock market looks to me as if it can come down by another 5% or so, but that doesn`t mean diddly squit in the larger picture. Things are improving in a lot of the major western economies and perhaps the next three months will show that maybe the pace of that recovery is faster than anticipated. BUT, we need to see that this recovery has some legs before we start to put the brakes on – we`ve got at least until Tuesday…