economic climate uk
MATTEO
Exchange rate
Housing issues
Private and public consumption
Investments opportunities: pros and cons
EXCHANGE RATE
Sterling has been floating since the UK withdraw from membership of the ERM in September 1992. Since that moment, the Bank of England has not intervened to influence the pound’s value, as it became independent from the UK government.
With a free floating exchange rate, the value of the currency is simply determined by supply and demand of the market. The Central Bank cannot set a target exchange rate and intervene in the market exchange rate for this purpose.
The advantages of a free floating rate are several:
No exchange rate target, so the Central Bank doesn’t need to hold foreign reserves;
Use of monetary instruments to support expansionary economic policies;
Less opportunity for currency speculation;
Freedom for domestic monetary policy, so interest rates can be set by the Central Bank independently to meet its statutory objectives, such as monetary stability and economic growth.1
The sterling is considered a strong currency, as traded on the exchange markets as a reliable safe haven. Among the factors that help to determine this status are included political stability, low inflation, monetary and fiscal policies regular coverage with reserves of precious metals and value against other currencies stable or increasing over the long term.
In recent years, however, the sterling has depreciated moderately against the other strong european currency (the euro), consequently the decision of the Bank of England to kick-start quantitative easing operations and APF (Asset Purchase Facility ) in March 2009 with the objective to provide liquidity to the market, promote economic growth and avoid the specter of deflation2.
The ECB in fact (which in its charter has the sole objective of ensuring monetary stability but not economic growth) has launched its easing program only in November 2011 and the first months of 2012, with the two
Exchange rate
Housing issues
Private and public consumption
Investments opportunities: pros and cons
EXCHANGE RATE
Sterling has been floating since the UK withdraw from membership of the ERM in September 1992. Since that moment, the Bank of England has not intervened to influence the pound’s value, as it became independent from the UK government.
With a free floating exchange rate, the value of the currency is simply determined by supply and demand of the market. The Central Bank cannot set a target exchange rate and intervene in the market exchange rate for this purpose.
The advantages of a free floating rate are several:
No exchange rate target, so the Central Bank doesn’t need to hold foreign reserves;
Use of monetary instruments to support expansionary economic policies;
Less opportunity for currency speculation;
Freedom for domestic monetary policy, so interest rates can be set by the Central Bank independently to meet its statutory objectives, such as monetary stability and economic growth.1
The sterling is considered a strong currency, as traded on the exchange markets as a reliable safe haven. Among the factors that help to determine this status are included political stability, low inflation, monetary and fiscal policies regular coverage with reserves of precious metals and value against other currencies stable or increasing over the long term.
In recent years, however, the sterling has depreciated moderately against the other strong european currency (the euro), consequently the decision of the Bank of England to kick-start quantitative easing operations and APF (Asset Purchase Facility ) in March 2009 with the objective to provide liquidity to the market, promote economic growth and avoid the specter of deflation2.
The ECB in fact (which in its charter has the sole objective of ensuring monetary stability but not economic growth) has launched its easing program only in November 2011 and the first months of 2012, with the two