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UK Chancellor's statement: More growth, less austerity - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 26, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Córdoba) - James Knightley, analyst at ING explains that today’s presentation of the Chancellor of the Exchequer, where he revised positively growth projections, weaken the argument that fiscal headwinds are a reason for the rate hike delay from the Bank of England.

    Key Quotes:

    “In an upbeat statement to parliament, the UK’s Chancellor of the Exchequer, George Osborne, suggests that UK growth will be stronger than previously thought, government borrowing will be lower and austerity will be relaxed.”

    “Consequently, the government forecasts that it will need to borrow £8bn less than previously expected while allowing it to spend an extra £12bn on capital investment. It also means that it now needs to cut government spending less aggressively in the next couple of years to reach the Chancellor’s fiscal target of a surplus in 2019/20.”

    “Many will question how a £27bn improvement in the government’s fiscal position has been generated from such a marginal increase in the growth forecast, modest changes to the interest rate outlook and the introduction of higher stamp duty on second homes.”

    “Irrespective of this, the outcome of more capex and a reversal on the tax credit cuts is a positive for the economic growth story. There had been concern that the incomes of lower earning households could be significantly impacted, which would have been a clear headwind to consumer spending more broadly. As a result, this helps to weaken the argument that fiscal headwinds are a reason for the Bank of England to delay monetary policy tightening until 2017, as the market is currently anticipating.”
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