Bank Of England Keeps The Sugar Rush Of Cheap Money On Tap

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Bank Of England Keeps The Sugar Rush Of Cheap Money On Tap
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  • Bank of England keeps rates at historic low of 0.1%.

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Q1 2021 hedge fund letters, conferences and more

  • The bank expects inflation to rise above 3% temporarily.
  • The pound slips 0.3% against the dollar.
  • The FTSE 100 rises 0.5%.
  • Mining giants, energy and housing stocks gain.

Bank Of England Is Not Changing The Mood Music

"The Bank of England isn’t ripping up the party rule book yet, content to let the economy feast on record-low rates and ultra-loose monetary policy. It is on alert, ready to change the game if the inflationary guest starts acting up, but right now it’s not changing the mood music.

The UK economy is still dancing to the tune of consumer confidence, helped by a bouncy castle of a housing market and the jump in activity since the re-opening of shops, pubs and restaurants in April hasn’t lost much energy. Current economic activity is even stronger than in May, with supply bottlenecks pushing up prices at a time of strong demand for goods.

How To Invest In India’s Growth with INDF’s Amit Anand

IndiaValueWalk's Raul Panganiban interviews Amit Anand, Co-Founder of INDF, and discusses his approach to investing and why India Financials are very attractive today. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with INDF's Amit Anand


So while the recovery party continues, CPI inflation is expected to blow the Bank’s target and exceed 3% temporarily, but then it’s expected to be in retreat, with the balloon of higher prices losing air.

Already there are party pooper signs. Companies are having to reduce services, due to the lack of staff. The Bank of England identifies that there are now recruitment difficulties across sectors and regions, and this could be a drag on growth.

The Sugar Rush Of Cheap Money

The Bank of England knows that the sugar rush of cheap money needs to be withdrawn. But right now it’s judging that the guests at the party aren’t yet robust enough to cope with their treats being taken away.

This attitude, with interest rate rises not yet in sight, pushed down sterling by 0.3% against the dollar, helping to propel the FTSE 100 higher, which is stuffed full of international companies which benefit from the exchange rate. With a barrel of Brent crude still above $75, a level it’s not been at since April 2019, Shell was one of the top risers in the blue-chip index, lifting 1.5%

Higher energy prices are yet another sign the global recovery is picking up pace, and mining giants have also gained so far today with Anglo American up 2% and Glencore and Rio Tinto rising by 1.5%.

With consumer confidence still high and the housing market not losing much steam, Berkeley Homes and Rightmove were also among the big gainers today in the blue-chip index, rising by 2% and 1.8% respectively by lunchtime.’’

Article by Susannah Streeter, senior investment and markets analyst Hargreaves Lansdown


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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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