The Bank of England's announcement, I personally do not great news but I'm not surprised. it was inevitable and has taken longer than I expected tbh. I fully expect us to go negative sooner rather than later and enter the world of the Japanese shrinking economy. Everyone prattled on about rises before but the BoE were doing things that suggested the later prior to the referendum. This article from May says exactly this, and exams negative rates in more detail. I posted about this prior to the ref, but it fell largely on deaf ears. (Yep that's an unashamed 'I told you so')
FWIW this is my take on a interest rate cut, with the likelihood of rates going negative as part of this, whilst we are still not into that yet. I'm sure there will be better explanations / analysis out there soon enough than mine and I am very open to criticism on my assessment as its my forte if I'm honest about it. This is how I understand it though.
I note here that negative interest rates have yet to be proven as a effective tool and yet that does seem to be the direction we are headed. I personally think they create as many problems as they solve. They are a sign of a stagnating economy with potentially limited sign for growth.
Its REALLY bad news for pensioners and pension pots. I think that the triple lock is very much at risk.
Its even WORSE news for people of my generation though. The state pension age will only go up again I fear. Public sector workers have not seen the end of cuts to pensions. Pension pots tend to need a certain level of interest / economy growth to make them sustainable. Every cut and every month they are low, is something of a threat to that.
With that in mind, if pensioners are protected, at the expense of the young, that risks all kinds of things. At its worst the split in generations it creates in the country is even more politically destabilising, even if you are a party that relies on the 'grey vote' and it completely undermines May's assertion of being for everyone and creating opportunity.
Also, whilst everyone says its good for mortgages I think there is a cautionary note here. Banks are not obliged to follow the BoE which Andrew Neil also points out
Andrew Neil @afneil
Gov Carney says banks have no excuse not to pass on rate cut. Correct. But doesn't mean they will!
They, in theory, could still raise rates. This is particularly true if profits start to drop if the banks really do start to struggle or their is a worry about their solvency. Plus many people won't be affected immediately by a rate drop as they are on fixed rates.
We still have the issue of a hike of inflation to think about as the value of the pound declines, which will take out a chuck of any savings to mortgage bills quite quickly.
And retired ex-pats in Spain are going to find it harder and harder and will start coming home (at cost to the NHS) whilst we become less attractive to temporary migrant workers (which might be a good thing to some - leave voters who want to stop 'immigrants taking jobs' / but a bad thing to others eg agricultural workers. And in the short term we may well face skills shortages).
It could impact on savers. At some point banks may start to charge people for saving. We take free bank accounts for granted in this country. If you've ever lived abroad and had a foreign account, it is a bit of a shock to find this out. It encourages a 'cash under the bed' mentality too.
It encourages more borrowing, which may or may not help people. When Japan flirted with negative rates, this was not so much of an issue as although borrowing was high, it was largely domestic rather than international and funded by the Japanese themselves. We have no such luxury. Instead we are saddled by massive personal debt problems, and I can't see trying to encourage that as helping the situation. Quite the contrary. Especially if coupled with the introduction of bank charges for accounts. We really need to be getting people to live with in their means rather than become dependent on debt for their long term well being and financial security.
Worst still, whilst this might push the price of property down, it also doesn't mean that it will be easier for younger people to get on the housing market. If it costs you to save whilst rents are pushed up by the buy to let market potentially getting more attractive to savers and no action taken on building as construction projects are axed in the short term.
Overall I think it helps businesses more than individuals. Which given we are desperate for investment and to increase exports and reduce our trade deficient makes a lot of sense. I think that we need to be actively encouraged to buy British as part of this tbh which could be something of a culture shock to us as we have been so used to relatively cheap imported goods. (Protectionism seems to part of the necessity of Brexit and should feature in trade deals).
Hopefully it will help to protect jobs and stop a recession as a result, but on the whole I think it makes life tougher rather than easier for a lot of people, which might seem counter intuitive.
Robert Peston @Peston
The 3-year cost of Brexit is 2.5 percentage points of lost GDP or national income, even with its exceptional stimulus, says Bank of England
Brexit-induced lost GDP for 3 years is equivalent approx to year's spending by government on education, despite costly monetary stimulus
www.conservativehome.com/platform/2016/08/joe-carlebach-please-dont-forget-our-hard-working-small-savers.html
A Conservative wrote a little bit about interest rate cuts a couple of days ago, which makes for interesting reading because of where it comes from. If reflective of Conservative voters, May could start losing popularity pretty quickly.
press.labour.org.uk/post/148445049814/britain-still-on-hold-until-hammond-makes-up-his
Labour Press Release on the rate cut, criticises Hammond's lack of action so far and his 'wait and see' approach. They talk about Corbyn's proposed £500 billion package
www.newstatesman.com/politics/uk/2016/08/how-would-jeremy-corbyn-pay-his-spending-pledges
Whilst the New Statesman ask how Corbyn intends to fund these massive spending pledges.
www.france24.com/en/20160804-eu-hits-china-russia-with-steel-anti-dumping-duties?ref=tw_i
EU hits China, Russia with steel anti-dumping duties.
In any new trade deal we REALLY need to be aware of stuff like this, especially since we will have less leverage and high votes for leave seem to also correlate areas with high imports from China.
www.independent.co.uk/news/world/europe/eu-trade-director-general-jean-luc-demarty-canada-deal-european-union-a7171601.html
EU close to death if it can not make a deal with Canada says senior EU official.
europe.newsweek.com/brexit-eu-uk-regret-good-idea-was-brexit-good-idea-487163?utm_medium=Social&utm_campaign=Echobox&utm_source=Twitter&utm_term=Autofeed#link_time=1470311436
No Bregrets says survey.
www.conservativehome.com/thecolumnists/2016/08/daniel-hannan-as-a-card-carrying-conservative-im-alarmed-by-labours-collapse.html
MEP Daniel Hannan is upset by Labour's collapse.
politicalscrapbook.net/2016/08/tory-mep-dan-hannan-endorses-campaign-to-bring-back-blue-passports-gets-mocked-ruthlessly/
And is mocked for supporting the Blue Passport campaign.
blogs.lse.ac.uk/politicsandpolicy/wales-and-the-brexit-vote/
The Welsh Turkeys?! Or a democratic deficit in Wales
And finally,
Jason Spacey @Jason_Spacey
It's unfair to say Ukip couldn't organise a piss-up in a brewery. They managed it most lunchtimes under Nigel Farage's leadership