View From City Road: German move won't be echoed here

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Wrongfooted again] That master conjuror, the Bundesbank, has surprised the markets by cutting the discount rate to a deeper than expected 4.5 per cent.

In doing so it has underpinned the dollar, which is already recovering on hopes of another rise in US rates and the persistent threat of central bank intervention.

Not that the Bundesbank's motives were entirely altruistic. With the inflation outlook in Germany brightening daily, a lower discount rate should underpin Germany's fragile recovery by boosting weak domestic activity and making exports cheaper.

The bigger-than-expected cut also means that Bundesbank watchers can now realistically look forward to a 4 per cent discount rate by the end of the year.

However, those who believe it might help rekindle prospects of a rate cut here at home can forget it.

We are not in the ERM any more. Britain and Germany go their own separate ways these days. With the Bank of England so worried about rising inflation pressures, the present risk for base rates is all on the upside.