Download Bank rate and forward market interest rates

Presentation to Cornwall Council Private
Developers Forum
2nd March 2012
Geoff Harding
Deputy Agent for South West England
Overview
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Quarterly figures:
2011 Q1 0.3 %
Q2 0.0
Q3 0.5
Q4 -0.2
Annual: 0.8 %
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GDP projection based on market interest rate
expectations and £325 billion asset purchases
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Projection of the level of GDP based on
market interest rate expectations and
£325 billion asset purchases
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Bank rate and forward market interest rates
Sources : Bank of England and Bloomberg.
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Conditioning path for Bank Rate implied by forward
market interest rates(a)
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Survey measures of capacity utilisation
Sources: Bank of England, BCC, CBI, CBI/PwC and ONS.
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Unemployment rates
Source: ONS (including Labour Force Survey).
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Self-employment(a)
Source: Labour Force Survey.
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Broad money(a)
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The construction sector – recent history
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to Q4 2011, at constant 2005
prices
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Prospects
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Contributions of expenditure components to changes
in demand in recessions and recoveries
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Household consumption and real income
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Survey measures of household expectations
Source: Research carried out by GfK NOP on behalf of the European Commission.
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Household saving ratio
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CPI Inflation projection based on market interest
rate expectations and £325 billion asset purchases
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Direct contribution of energy prices to CPI inflation and
Bank staff’s central estimate of VAT contribution
Sources: Bloomberg, Department of Energy and Climate Change, ONS and Bank calculations.
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Contributions to CPI inflation
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US dollar oil and commodity prices
Sources: Bloomberg, S&P indices and Thomson Reuters Datastream.
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Inflation expectations for a year ahead
Sources: Bank of England, CBI (all rights reserved), Citigroup, ONS and YouGov.
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Public sector net borrowing(a)
Sources: HM Treasury, OBR Economic and Fiscal Outlooks (EFO) and ONS.
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Business investment and surveys of investment
intentions
Sources: Bank of England, BCC, CBI, CBI/PwC and ONS
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Factors likely to hold back investment
Sources: CBI, CBI/PwC and ONS.
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Credit conditions
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Loans to individuals and private non-financial
corporations
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Lending to small and medium-sized enterprises(a)
Sources: Bank of England, BBA, BIS and Bank calculations.
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Net funds raised by UK businesses(a)(b)
Sources: Bank of England, BBA, BIS and Bank calculations.
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UK banks’ leverage
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UK banks’ indicative longer-term funding spreads
Sources: Bank of England, JPMorgan Chase & Co., Markit Group Limited and Bank
calculations.
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Credit Conditions Survey: spreads over reference rates
on lending to corporates by firm size(a)(b)
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Stock of lending to UK PNFCs(a)(b)
Source: Bank of England.
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Credit Conditions Survey: availability of credit to
households(a)
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Bank Rate and average quoted interest rates on new
household borrowing
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Mortgage lending by the major UK lenders(a)
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SUMMARY
• Growth outlook: a pick-up in 2012 H2, driven by better prospects
for consumption as inflation comes down and real incomes stop
falling
• Factors such as the Diamond Jubilee and the Olympics will
disrupt the pattern of demand.
• Uncertainties remain regarding the household savings rate
• Increased uncertainty is holding back investment, but a pick-up
in consumption should have ‘accelerator’ effects.
• Other components of demand – Government, net trade, stock
building -- will be negative or flat at best.
• Inflation has begun its long-promised fall as temporary factors
unwind.
• The risk that inflation will fall below target with continuing slack
in the economy is being mitigated by the increase in QE.
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Presentation to Cornwall Council Private
Developers Forum
2nd March 2012
Geoff Harding
Deputy Agent for South West England
Real house prices following banking crises
Sources: OECD and Bank calculations.
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Chart 1.10 UK banks’ indicative longer-term funding
spreads
Sources: Bank of England, JPMorgan Chase & Co., Markit Group Limited and Bank
calculations.
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Indicative median interest rates on new SME
variable-rate facilities(a)
Sources: Bank of England, BIS and Bank calculations.
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