Brexit: Bank of England Desperation Play

Almost as if to say “We told you so,” the Governor of the Bank of England, Mark Carney, announced Thursday, there would be an interest rate cut of 0.25% from 0.50%, with immediate effect because of the worsening economic indicators following the Brexit vote in June.

This move by the U.K. equivalent of the Federal Reserve, with the first cut in interest rates since 2009, is intended to stimulate the economy even as inflation appears to be heading north of the 2% target set by the Bank of England. Potentially this is a very bad combination, where inflation and stagnant growth create a toxic economic environment. So the Bank of England is determined to head it off by stimulating the economy through a rate reduction and limited bond buying strategy.

So what has all this to do with the U.S. and your money, you ask.

Well, as you can see in this updated Brexit report, Weiss Ratings has asserted what happens in Europe does not stay in Europe. The report examines the effect on the airlines, U.S. Treasuries, and you and your investments. Remember that a strong U.S. dollar v GB pound means that imports are cheaper, but exporting U.S. manufactured goods and services become harder as they become more expensive.

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