‘Mother of all bubbles’ Bank of England has backed into ‘dangerous corner’ – SHOCK WARNING
THE Bank of England has inflated a mammoth asset bubble with its staggering money-printing programme and has now backed itself into a dangerous corner, a top investment manager has warned.
By LANA CLEMENTS
Express.co.uk
Thu, Jun 1, 2017
British households are suffering surging inflation that could be tackled by raising interest rates, if policymakers led by Governor Mark Carney raised interest rates, according to David Roberts fund manager at Kames Capital.
The Bank is scraping around for excuses to keep interest rates low for as long as possible, including blaming Britain’s vote to leave the European Union, he said.
But the real reason is the Bank’s quantitative easing programme, which has injected £435billion into the economy since 2009 by buying Government debts – known as bonds – said Mr Roberts.
The Bank of England along with central banks across the world now have added almost $18trillion (£14trn) to their balance sheets over the past 10 years, pushing up bond prices.
Raising interest rates risks popping the huge bubble that has been created in bonds.
Record low rates have also helped inflate house prices and borrowing, with markets now baring worrying similarities to 2008, according to Mr Roberts.
He said: “Central bankers globally have expanded their balance sheets to nearly $18trn in the past decade, a sum greater than US GDP.
“They have created the mother of all asset bubbles across most financial asset classes and that, coupled with the ongoing need to fund ever-larger government deficits, means they seek any excuse to keep rates as low as possible for as long as possible.
”Apparently, the main reason for not raising rates in the UK recently was because consumers would face a squeeze this year from the impact of higher inflation, all of which was attributed to a weaker sterling.
“However, if Carney really worried about the squeeze on household income, firstly in part this is a situation he created and secondly, he could help reverse it by raising interest rates.”
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