Bonds' day in the sun

Article Abstract:

The UK government has raised interest rates and given the Bank of England freedom to decide on interest rate policy. This has led to a rise in the value of corporate bonds although they tend to go down in value when interest rates rise. This rise in value is because inflation is seen as more under control following the rise in interest rates, and inflation also affects the value of bonds. Long term interest rates have dropped following the change in monetary policy with regard to the bank.

Private Bonds & Notes, Capital market, Capital markets

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On gaps, filters and pot noodles

Article Abstract:

The UK output gap is not easy to assess since machinery may be scrapped more rapidly during recessions. Economists tend to measure trend output through eliminating cyclical fluctuations, instead of potential output which is less easy to calculate. The output gap is seen as a way of predicting inflation. One view is that a measure should be chosen that fits models of inflation in the past. Some measures can show spare capacity in the economy and predict inflation in the past.

Measurement, Gross domestic product

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