24 November 2009

Speculation over the British Economy

Investment traders are speculating as to what happens when the Bank of England withdraws its significant fiscal stimulus packages. The one which has tongues wagging on a frequent basis is quantitative easing - the effective 'printing of new money' to boost an economy.

When first introduced this year, the reaction was mixed - some thought it was a worthy method of pushing deflation away and providing a cushion for the economy. Others argued that by forcing deflation away, inflation was a much higher risk and the pressure on the pound would be too great.

So far, the Bank has spent 200 billion pounds on the QE programme. It is due to finish early next year. Around the same time, it is expected that the base interest rate will be increased. Futures investors are expecting the interest rate to be around 4 per cent before long.

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