Our views

Monetary policy is running out of steam

Darren Bustin, Head of Derivatives

4 August 2016

I believe monetary policy is running out of steam. The actions of the Bank of England today may not be the most effective tool in driving the UK economy going forward, and a fiscal response may be required to revive the economy if things get worse.

One casualty of today will be pension schemes, whose deficit is likely to get worse rather than better. It will also be a wait and see approach in regard to banks and their profitability.

With Philip Hammond stating he ‘will do what it takes’ in a letter to Mark Carney it may be the case that coordinated fiscal and monetary policy is required if things were to get worse.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.