Some interesting economic observations from the Royal Bank of Scotland have appeared in Money Facts. As this Bank’s economic team proved to be the most accurate in predicting economic forecasts in 1999, its views deserve serious consideration.
It notes a lack of evidence to suggest that lower base rates would weaken sterling, as has been the Bank of England’s received wisdom. Indeed it notes that the Bank of England considered direct action in the market but wisely decided against. The 15% fall in the value of the euro in the first year of the single currency was blamed on political problems rather than economic ones. However this means that there is no possibility of the UK joining the single currency until both sterling and the euro stabilise.
The Bank notices that inflationary pressures are growing. They particularly concentrate on wage increases which are getting bigger. While the private sector figures could be dismissed as a millennium-related blip, the increases in the public sector are not so easily disregarded.
[1999]