Bank of England Checks as Tories Plan Austerity

Market Trends - 11/05/2015

With the clear majority having been achieved in last week’s elections, the Conservatives are wasting no time in preparing measures to push through the lower house of the UK Parliament. There is growing opposition to the EU, but moreover, the vehement hostility towards austerity measures, especially from the vocal Scottish National Party. As it stands, the Tories (another name for UK Conservatives) aim to eliminate the deficit in the UK by pushing through a raft of measures, including a proposed GBP 12 billion in cost saving measures, mainly at the expense of social welfare initiatives. Aside from the proposed austerity measures which are likely to draw the ire of many citizens, the Tories are busy negotiating the future of the UK within the European Union as it seeks more autonomy to make its own decisions independent of the Union. Many of the measures are designed to prevent immigrants from taking advantage of lax social welfare laws that have pushed the government into deficit.

 

Although boasting a majority, David Cameron has many different parties to appease regardless of the election outcome. The Scots are growing increasingly restless and seem intent on possibly fracturing the Kingdom, using momentum from the latest secession vote to garner support. Members within Cameron’s own party are also trying to end Europe’s creeping influence into UK policy with the combination of these two factors having the potential to push the government to the brink. Markets have been so far kind to the results, welcoming further austerity measures with the Pound continuing to gain ground against the Euro and US dollar. The Bank of England remains accommodative with no imminent plans to raise interest rates as evidenced by today’s decision. However, inflation remains a touchy subject, with the measure still printing well below levels targeted by the Central Bank. Without a rebound in the measure or stronger GDP growth, the Bank of England is likely to remain cautious on the outlook for interest rates.

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