Still pounding a random walk

Article Abstract:

There is a debate as to the likely performance of pound sterling in 1999, and the impact of interest rates on the value of the pound is unclear. The pound may follow a random walk. The pound's value may be linked to interest rate levels, but the view that a high interest rates mean that pound sterling will fall, has been criticized. UK interest rates were high at a time when pound sterling was undervalued in 1995, so currency risk is not the key issue. The pound has risen when markets have become risk averse, though efficient market theory would not forecast this.

Exchange Rates, Prices and rates, Pound (United Kingdom)

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Base rate cuts bring joy...and dismay

Article Abstract:

UK interest rates have fallen which means that mortgage holders pay less, but savers receive lower returns. Government securities may offer an attractive alternative for investors seeking to protect their incomes. Lower interest rates could push up inflation and this could affect the wealth of holders of government securities. Index-linked securities are one way of tackling this problem. Financial markets foresee a drop in UK interest rates of 0.5% in 1996, but markets are not infallible.

Analysis, Personal finance

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Still vulnerable to shocks

Article Abstract:

UK financial markets have been affected by concern that inflation is rising in Feb 1995, despite a rise in interest rates to combat such fears. Commodity prices have risen and this will affect output prices. The pound sterling has fallen in value due to political uncertainty and these means that commodity price rises have a greater impact. A rise in US interest rates rise would place the Bank of England under pressure as would a rise in German rates which could occur in spring 1995.

Economic aspects, Financial markets

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