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16 Apr 2013
Forex Flash: What can Carney do? - Societe Generale
FXstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale has asked, aside from low rates, low gilt yields and a weaker pound, “What can Carney do?”
He notes that the weakness of UK real income growth is the biggest obstacle in the way of UK economic revival.
Juckes adds that income growth is currently running (at 5%) well ahead of average wages (1.2%) but even if households have de-leveraged enough (for now), real consumption growth is constrained. Further, he comments that nominal wage growth is held back by a global labour market, the weakness of the economy and the weakness of UK labour productivity. He writes, “And if wages don’t increase faster and inflation can’t/won’t fall much further, the only way to boost consumption is to boost fiscal transfers, cut taxes, or increase either borrowing or employment growth. Policy-makers will try all and any ways to encourage banks to lend more, but they may well fall back on boosting employment with the help of a weak pound, in the end.”
He notes that the weakness of UK real income growth is the biggest obstacle in the way of UK economic revival.
Juckes adds that income growth is currently running (at 5%) well ahead of average wages (1.2%) but even if households have de-leveraged enough (for now), real consumption growth is constrained. Further, he comments that nominal wage growth is held back by a global labour market, the weakness of the economy and the weakness of UK labour productivity. He writes, “And if wages don’t increase faster and inflation can’t/won’t fall much further, the only way to boost consumption is to boost fiscal transfers, cut taxes, or increase either borrowing or employment growth. Policy-makers will try all and any ways to encourage banks to lend more, but they may well fall back on boosting employment with the help of a weak pound, in the end.”