Outlook The economic consequences of the Japanese disaster may be felt especially acutely here in the UK in one specific way. If the way in which investors in gilts and interest rate futures were behaving yesterday is any guide, the earthquake might mean that the Bank of England's Monetary Policy Committee now waits longer than previously expected to increase the cost of borrowing.
Those markets were, until this week, pricing in an initial rate rise of 0.25 percentage points in May, followed by a second increase in October. Now the money seems to be on August and February 2012.
That shift is logical enough. We know that the balance of the debate about when to raise rates has been incredibly finely balanced, so even if the effect of the disaster in Japan is minimal here, it could be enough to tip the scales. Certainly, any threat to growth is likely to give the MPC pause for thought. And since this is a disaster that may, at the margins, ease the external inflationary pressures facing Britain, the case for delaying a rate rise because of it is stronger.