The base rate fallacy: Lower interest rates might do more harm than good. They could add to inflation in 2000-01 without reducing the chances of a recession starting soon

Article Abstract:

The Bank of England is facing calls to cut interest rates further, but lower interest rates take time to boost activity, and rate cuts will only begin to have significant effects later in the year. Economists believe that the economy will be recovering by then anyway. A rate cut now would strengthen the recovery next year, but will not avert the current threat of recession. Recessions affect only a few firms badly and if companies are expecting rates to fall again, they may delay profitable investment projects.

Interest Rates, Monetary policy

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UK equities: part two

Article Abstract:

UK equities should benefit from a recovery in corporate earnings following the end of a pause in growth, according to BZW. Output growth should recover during 1996, and cost pressures are likely ot ease which will help boost earnings. Growth stocks and shares in small companies are both likely to benefit, though cyclical stocks will initially benefit. Companies investing to cut costs are likely to perform best since pricing power will have less effect.

Business cycles

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