Afternoon:
15°c
You would have thought that a country with a £150 billion deficit and an interest bill topping £120 million a day would not be top of the list of safe-haven destinations for international investors.
But, as the super-low yields on Britain's gilts highlight today, that seems increasingly to be the case.The Chancellor repeatedly talks about how his tough austerity measures are the reason why our borrowing rates are so low. He is partly right.
As Europe's Club Med economies struggle to meet their austerity targets, George Osborne's decision to stick hard to his cuts is winning fans on the international markets and bringing us stable, low interest rates. The chaos in Washington only adds to that argument.
But that is only part of the story. Arguably more influential on gilt yields is the fact that the aggressive cuts Osborne laid out last year are so hampering our economic growth that there is now no chance of a Bank of England rate rise until well into next year. As gilt yields should reflect the interest rate expectations over the course of the bond, it is little surprise that the yield has fallen so low.
Furthermore, the austerity measures now being forced on Barack Obama in Washington are likely to hobble the already-stunted US economic growth. That is a major worry for exporters here and across the globe.
Overzealous austerity may be good for interest rates, but at what price to economic growth?
Reader views (1)
We need to distinguish between what's good for bankers and what's good for the rest of us.
BB
- Bill Kruse, East Molesey, 04/08/2011 11:08
Report abuse
