Pound drives home Clarke's dilemma
Wednesday 22 January 1997
Eddie George, Governor of the Bank of England, signalled earlier this week that he had advised higher borrowing costs to tame consumer demand despite the recent rise in the pound. Mortgage figures from the Building Societies' Association, showing that new lending grew nearly 50 per cent last year, underlined the Bank's concerns yesterday.
However, the CBI said the decision was "finely balanced". Ross Buckland, chief executive of foods group Unigate and a member of the CBI's economic affairs committee, said: "We say, looking at all the elements, that no interest rate rise is justified at present."
Paul Mortimer-Lee, chief economist at investment bank Paribas, said: "It is a choice between two evils. Either interest rates are going to be too low or the exchange rate is going to be too high."
The CBI's quarterly survey of manufacturers showed that export orders had levelled off for the first time since October 1993. Manufacturers' optimism about exports had also fallen.
The survey showed output had grown steadily over the past four months, although its rate of growth had slowed. General business optimism was steady, and there was a sharp rise in the balance of companies expecting to increase rather than reduce their prices. Domestic demand for consumer goods in particular was still improving.
Fresh evidence of the housing market recovery came from the Building Societies Association. It said net lending in 1996 reached pounds 13.24bn, up 48 per cent on the previous year.
In the final quarter of last year, societies' net advances, at almost pounds 4bn, were 95 per cent up on the fourth quarter of 1995. Although net advances dipped slightly to pounds 1.2bn in December, they were up 50 per cent on the same month last year.
The British Bankers' Association said mortgage lending rose by pounds 552m, compared with pounds 606m in November and a six-monthly average of pounds 571m.
But Dharshini David, UK economist at HSBC Markets, said seasonally adjusted net new commitments, the amount of future lending pledged by building societies, was expected to reach 48,000 in December, the lowest in five months.
"The figures reveal tentative signs of a weakening of mortgage demand," she said. "This could reflect the disappearance of many fixed-rate mortgage packages following the base rate rise on 30 October."
Separate figures showing an unexpected drop of pounds 3.8bn in total bank lending in December muddied the picture. Even though a large part of the fall was due to end-of-year transactions in gilts, underlying loans were weak. The growth rate of M4, the broad money measure, fell to 9.6 from 10.8 per cent in November.
- 1 Russell Brand accuses FOX News anchor Sean Hannity of terrorism after aggressive Israel-Gaza debate
- 2 Pope Francis issues top 10 tips for happiness
- 3 Disney heiress Abigail disowns her share of family profits in West Bank company
- 4 The secret report that helps Israel hide facts
- 5 Now diplomacy has failed, boycotting Israel might be the only way we can protect the people of Gaza
Russell Brand accuses FOX News anchor Sean Hannity of terrorism after aggressive Israel-Gaza debate
Pope Francis issues top 10 tips for happiness
Justin Bieber posts Instagram photo of a crying Orlando Bloom after Ibiza fight 'over Miranda Kerr'
Disney heiress Abigail disowns her share of family profits in West Bank company
Kelsey Grammer forgives the man who raped and murdered his sister in 1975
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...