This evening the Fed cut rates by 0.75% (less than the expected 1%) to 2.5%.

This is on the back of not so bad news from Goldman Sachs.

We expected a 1% cut - but got three-quarters.

The Dollar has strengthen - markets have recovered most of yesterday's losses.

We can all breath a sign of relief then?

Or is this true: 'The US is behaving like an emerging market http: / /www .ft .com /cms /s /0 /194ed856 -f441 -11dc -aaad -0000779fd2ac .html'

Does that mean that there has been a fundamental shift in the way that 'safe' markets now function?

Will that lead to a further re-evaluation of risk with the 'safe' market's risk profile downgraded to that of an emerging market?

If so, then this would simply support investment away from the 'safe' markets and into the emerging markets?

This is the siesmic shift recognised at the beginning of all this trouble back in August - it now seems to be becoming the established view.

Is it really true? A look at today's FDI monitor suggests it probably is - as investment continues into CEE countries (and no doubt others) at a very high rate?

Anybody out in CEE want to give a view on this?

Cheers
Neil

Neil, definitely sluggish in France. The high tax rates simply throttle the economy. I agree with Savvy in a sense but it's a bit like saying they've avoided the car crash by driving so slowly! I don't see property prices in France generally growing again for a while but there are always hot spots same as the UK.
Huw

£ has fallen 12% against the Euro - at least another 3% fall (minimum) OR a further 13% fall (maximum) - IMF thinks that this would be required to make our economy competitive once more.

Most likely somewhere between the two. One thing is for certain £ will not recover anytime soon, neither will the dollar since the FED keeps manufacturing more and more money - a pointless exercise that they will eventually abandon (this strategy has NEVER worked in the long term) and raise interest rates painfully high.

What the fed is doing is criminal and it should be disbanded. They are effectively saving reckless spenders and irresponsible lenders & financial institutions at the expense of the average hard working american. It will take many years for the US to recover from the resultant recession.

The UK position is only mildly better.

Gordon Brown is no better opting for popularist short termism, of course we praise them when times are good ...... but history will paint Mr Brown and the labour governement as wasteful fools.

Richard, could you elaborate on where you think Gordon Brown has opted for Short term Popularism? I thought he was working on making himself very unpopular.

I have never thought of him as worthy of his position as Chancellor and even less in his current position - promoted beyond his capabilities comes to mind and having promoted himself to that position makes us all responsible for allowing it to happen. We rant on these forums but we don't seem to take action where it's required (I'm also guilty of this).

All of Gordon's policies when Chancellor seemed to be like sticking Bandaids over earlier wounds and nothing convinced me that there was long term planning. These policies then force the rest of the country to think Short Term. The latest Capital Gains fiasco bears that out - businesses made long term decisions based on Taper Relief, then in Nov/Dec many were forced to take knee jerk decisions and sell their businesses before 5 April , then he changes his mind again and dishes out another little gem - Entrepreneur's relief - and what a stupid name that is, he has turned people's lives upside down over this and has no idea the impact it has on the ordinary businessman and his family, too tied up with the City to know what it's like out in the real world. I really want him to go, apart from his lack of long term planning he is no statesman and this country desperately needs a statesman - if there are any left out there.

Some serious long term vision is needed for businesses in the UK. Contracts should be longer, Customers should be thought of as long term income, quality should be top of the agenda rather than price and long term maintenance of everything is essential - including relationships, finances and health.

Jo

Totally agree Savvy. Did you realise you've just established a record - the first person ever to ask Richard to elaborate on his opinions!

Oh, well I like to hear people who have alot to say (as long as it's useful or interesting) as you may have noticed that I wax lyrical too!

Today is base rate day for the Bank of England and ECB - which way will they go?

The moderate prediction is a 0.25% cut from the BoE - but the more bullish view is a 0.5% cut.

The ECB is expected to stay its hand.

The fall in Sterling this morning suggests markets may be gambling on a 0.5% cut.

What do you guys think?

Cheers
Neil

Hi Neil

I think the BoE will take not a blind bit of notice of one month's house price data , that's a certainty. I also think, though that they MUST cut tomorrow . And I suspect, to keep their 'slowly slowly' message intact, it'll be 25 points.

The ECB has a harder task - the question has to be how many countries are in each camp - those that really don't need a cut and those that are crying out for one - Italy (election at the weekend desperately needs rates to come down), so does Spain, probably Ireland and maybe France. Germany definitely doesn't.

I reckon they'll leave the eurorate the same - for now. A downward trend is inevitable sooner or later though.

Correction - the base rate decision for BoE and ECB is tomorrow - Thursday the 10th (not 9th April as I previously said).

Apologies

Cheers
Neil

Hi

I suppose the real question about base rates these days is not whether they'll come down, but whether it matters much. They seem increasingly irrelevant, at least for the property market. And it certainly seems the days when the BoE had a profound effect on the supply of credit through bases rate changes are gone. All that matters today is be will any cut - which seems certain - be passed on to three month Libor?

As for the ECB, well, its remit is so tight that it's unlikely to do anything that can be seen as proactive - so a cut from them at the moment, with with those high inflation figures around, is a no no.

cheers