The immense danger of the prolonged rise in interest rates on both sides of the Atlantic was that central banks would overdo it.
Central banks were severely scarred for failing to diagnose the onset of the great inflation. Printing presses were allowed to operate for too long and low, negative interest rates prevailed.
What may have been misjudged is that an overzealous monetary response to a cost-of-living crisis, largely caused by supply chain problems, would do little to calm prices in the short term.
However, it would be a huge blow to global production, already hit by rising energy costs.
Reality is coming home. The U.S. economy had an unexpectedly strong third quarter, expanding at an annual pace of 4.9 percent.
Rate freeze: The US Federal Reserve (pictured) has kept its federal funds rate in the 5.25% to 5.5% range, thinking it has done more than enough to quell inflation.
Despite this, the US central bank, the Federal Reserve, is in wait-and-see mode.
Last night it kept its federal funds rate in the 5.25 to 5.5 percent range, thinking it has done more than enough to quell inflation. The British economy has also resisted the onslaught of the Bank of England.
However, there are signs that unless the Bank pauses today, the results could be calamitous.
The Free Market Economic Affairs Institute notes that the money supply is contracting at an annual rate of 4.1 percent, meaning the availability of credit is contracting. Fear a recession.
Worryingly, insolvencies in the UK reached the highest level since the great financial crisis in the nine months to September.
The number of companies on the brink of a cliff has increased markedly, says bankruptcy expert Begbies Traynor.
The October Manufacturing Purchasing Managers’ Index showed improvement but, at current levels, is still in slowdown territory.
There is still life in the old bulldog and it would be crazy for the Bank to continue squeezing and destroying production, jobs and tax revenues.
Against all expectations, house prices, as measured by Nationwide, rose in October by the most since March 2022.
On the High Street, Next is defying gravity and improving its profit outlook for the fourth time in six months.
All this at a time when threatening prices, with the possible exception of fuel, seem to be receding. Food prices continue to rise, but the pace of increase is slowing.
Wages no longer outpace inflation despite near full employment. Consumer prices are falling, so there is no point in resorting to the sledgehammer.
breathing better
Damn the slow buildup! GSK’s respiratory disease vaccine arexvy is on track to become a blockbuster, having racked up £700m in sales in the third quarter from a steady start.
Even more satisfying for UK life sciences is that success has been achieved in the face of rival punch Pfizer. GSK’s treatment is more effective and the deployment, through the CVS pharmacy chain, is notable.
Independent GSK, designed by chief executive Emma Walmsley, is on a roll.
Pre-tax profits hit £1.8bn in the third quarter and, at £5.7bn so far this year, are 46 per cent higher.
The respiratory vaccine could soon be available at a practice or pharmacy near you in Britain. It gained fast-track approval from the UK medicines agency in July and is now available privately. Discussions with the NHS are ongoing.
But with the vaccine likely to empty doctors’ surgeries, emergency departments and beds, there is an overwhelming case for its rollout in Britain.
GSK’s other successful vaccine, shingrix, is stalling in the United States. But a deal with China, which protects a vast population over 60, means there will be plenty of revenue to come.
A shadow over future prospects is the indigestion litigation brought by 79,000 plaintiffs in Delaware courts.
The case will be heard in January. The evidence against GSK is weak but the outcome unpredictable.
terrorist mission
Until now, the United States’ war against cryptocurrency terrorism financing has been carried out largely in secret.
Hamas’ barbaric attack on Israel is changing things. This week, US Undersecretary of the Treasury Wally Adeyemo was in London to urge a coordinated crackdown on the way Hamas exploits cryptocurrencies to circumvent sanctions.
He worries that as other sources of funding dry up, cryptocurrencies will become the last refuge.
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