Rate cutting palooza

December 5th, 2008 • Related • Filed Under




European Central Banks cut rates

The Bank of England’s Monetary Policy Committee voted to drop its key lending rate by a full percentage point to 2%. The bank last cut its benchmark rate to that level in 1939, where it stayed until it was hiked to 2.5% in 1951.

"In the United Kingdom, business surveys have weakened further and suggest that the downturn has gathered pace," the Monetary Policy Committee said in a statement announcing the move.

The European Central Bank’s Governing Council slashed its key lending rate by 75 basis points, or three-quarters of a percentage point, to 2.5%. The cut is the largest in the ECB’s 10-year history.

"Largely related to the effects of the intensification and broadening of the financial turmoil, both global demand and euro area demand are likely to be dampened for a protracted period of time," said ECB President Jean-Claude Trichet in his monthly news conference following the decision.


HSBC Fund buys gold in anticpation of inflation

HSBC Investment Management’s $2.6 billion Absolute Return Service started buying gold again on expectations that inflation will accelerate and may start adding coffee, sugar and grains next year.
Gold now accounts for 3 percent of the portfolio, fund manager Charlie Morris said by phone from London yesterday. Morris had sold the metal in July when prices were about $900 an ounce. Gold has declined 15 percent since the end of July.
“Gold is the best supported of all commodities,” said Morris, whose fund has lost 14 percent this year. “People are buying in anticipation” of inflation, he said.

 

My comments: With all of the rate cutting, stimulus, and money printing going on worldwide I would agree that gold is very well supported going forward.

John Polomny
The Real Deal

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