The Bank of England announced that they will be putting another 50 billion pounds ($79.3 billion) into their economy to avoid a double dip recession due to its unstable recovery. The BoE also said that they will continue to hold their record low 0.5% interest rate to help support economic growth. This comes after growing pressure on the government to step up its economic support efforts after the English economy shrank last year, followed by the highest unemployment rate in seventeen years.
Back in October, economists said that the central bank would be putting 50-75 billion pounds into the economy to help avoid any shocks from other European countries and their debt issues. Despite some welcoming news, the overall recovery is still weak. The British economy shrunk in the last quarter of 2011, making it necessary for the government to step up its efforts to make sure that the economy does not slip back into a brutal recession. However, a recent rash of upbeat economic news has been a welcoming sign that the worst may be in the past. Manufacturing numbers and service firms have shown signs of strength so far this year, making analysts speculate that December could have been a bottom for manufacturing in particular.
Although stimulating your economy is all great news, it is not great news for your national debt load. The government is held captive by their promise to reduce their debt levels within five years. All easing and stimulating must come from the central bank, which much like in the US, has been receiving doubt on whether its stimulating exercises really work or if it’s just a bunch of hot air. However, the central bank announced that inflation levels were at 4.2% in December, down from 5.2% in September. The central bank went further to say that it expects to have the inflation levels to its 2% mark by year end. Regardless if you agree with the Bank of England or not, they are starting to keep inflation in check, which could put your economy in a choke hold if it is not regulated and taken care of.
Britain continues to deploy isolation tactics against the rest of the EU, who are scrambling to find a debt solution to ailing countries such as Greece. However, it faces many lingering challenges at home such as inflation, unemployment and national debt. The Bank of England is currently trying to manage the economy after government officials have said that their hands are tied when it comes to pumping more money into the economy and that it is now in the hands of the central bank. At this time I would not be a buyer of European stocks. There is simply way to much uncertainty from even stable countries such as Britain. There will come a time when European stocks can be bought again but until Greece can figure out its debt situation and England can get its economy under control, etc then I do not see the point of owning European stocks.