The week began with the promise of so much, particularly as Central banks had the opportunity to change the direction of the recession that has plagued the world economy. There was an expectation for the FED to undertake QE3 as an alternative to ‘Operation Twist’, however this is almost completely ruled out. Then the Bank of England and MPC chose to ignore the poor GDP figures out of the UK and elected not to extend QE or cut interest rates. Both the FED and Bank of England cited the Eurozone as the main threat to their economies and felt the most appropriate economic policy would be to urge the Eurozone to settle their situation. When the ECB stood up to make a decision on interest rates, it failed to deliver again, making a decision to not change interest rates. There is a discussion about the use of the EFSF and ESM, but with the political struggle of finding common ground between Germany and the rest of the Eurozone nations, there is little chance of anything being achieved.
Look forward to the Bank of England report as well as the ECB report in the middle of next week. Until Monday, enjoy the weekend. (JKM)