Britain crawls out of the recession

Britain has come out its recession, but with GDP growth at a mere 0.1 per cent in quarter 4 2009, it was hardly cause for a fanfare yesterday.

Indeed, the pound fell on the less than remarkable news. Forecasts from economists had been for a 0.4 per cent growth - but their increasingly wayward predictions are making them almost worthless.

Colin Ellis at Daiwa Capital Markets Europe said: "Never has an end to a recession been so underwhelming."

As the pound fell, hopes rose that the UK record-low interest rate of 0.5 per cent would remain in place for some months to come.

Mr Ellis commented: "With the economy still in intensive care, there is a strong case for more support from policy to boost growth and job creation."

Now popular forecasts are that the Bank of England will continue with its quantitative easing programme.

The Office for National Statistics will produce two revisions to the GDP growth figures which could take the figure up or down by 0.1 per cent. Business Secretary Lord Mandelson said last night that he expected the figure to be revised upwards.

Banks benefit from quantitative easing

The Bank of England is going to print another £25 billion in its quantitative easing programme - and it should be the final amount of extra cash pumped into the economy; the total has reached £200 billion since QE began in March.

Have you felt it? Have you had your share? If you own a business, have you found it easier to get credit?

Like the innocent child asked when we 'lost' all that money in the days of the credit crunch: where has it all gone?

Quantitative easing and low interest rates should make it easier for businesses to get credit. The fact that as taxpayers we own most of the banks now should also make it easier to get credit.

It hasn't. The banks are stockpiling cash (apart from their chunky bonuses once again), and would claim that they are doing what they were told to do: making a banking crisis less likely in the future and only lending 'responsibly'.

Here's you cake; have a hefty bite from it.

Just as businesses and individuals will abandon Royal Mail because of the foolish strikes that have been perpetrated in recent weeks, it would be nice if we could find an alternative to these banks.

Suggestions, anyone?

Is the Bank of England happy to see sterling fall?

With the pound falling once again against the dollar and euro, it would appear that the governor of the Bank of England is quite happy with the situation.

I'm guessing that most of us would prefer to see a strong pound, giving a boost to the general well-being of the country, and also making our money buy more when we're abroad.

Apparently Mervyn King doesn't see it that way.

He said: "The fall in the exchange rate that we have seen will be helpful to that process [he was referring to exports]. There's no doubt that what we need to see now is a shift of resources into net exports."

His comments caused the pound to fall further. If the Bank of England is seemingly unconcerned about the plight of the pound, why would investors put their faith in it?

The value of sterling also reacted badly to the news that the Bank will be holding a meeting with senior City economists to discuss the Bank's Quantitative Easing policy amid speculation that markets are losing faith in the strategy.

Currency strategist at Bank of New York Mellon, Simon Derrick, said: "The perception in the market is starting to build up that Mervyn King is not averse to sterling continuing to weaken, as long as it is not at an overly fast pace.

"If you smile and are not seen to be frowning at the fall in sterling it's another way of weakening monetary policy."