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USA cuts 3/4% in one go

By Andy Shaw | January 23, 2010

Originally Posted 23rd January 2007

Hi,

I was asked this question and thought you may be interested in my answer.

HI ANDY WHAT DO YOU THINK THE IMPACT WILL BE FOR THE UK BOTH SHORT AND MEDIUM TERM? CHEERS

Hi Xxxx,

These are interesting times.

I’m mixed as to my thinking on the effects of this. From one point of view, I love the way the Americans are willing to change direction and fight to keep their economy out of recession, knowing that they will get a slating from the boffins for cutting so far and so fast.

I would say that I am 85% confident of a rate cut of 0.25% next month, I think they will refrain from dropping any sharper, but I do think they got it wrong last month, and maybe should cut 0.5%, even though any jump like that does show poor financial management.

Still in my opinion, Darling is useless and just a puppet controlled by the worst ex chancellor this country has ever seen. And Mervyn King is a lame duck who is controlled by exactly the same person. I’m hoping Mr Brown lets some reality slip into his figures (probably for the first time) and starts to change his thinking otherwise we could be facing a long period of uncertainty which will badly affect the value of the pound, and therefore the economy too.

I don’t think the way is really going to become clear until the remainder of the 350 billion loss has been accounted for. I think there’s about 200 billion that the banks have still got to own up to, but hopefully with their figures coming out in the next few weeks we should see some reality returning to their balance sheets. Then we’ll have to wait and see what the markets think of that, and whether they believe them.

So I think we are looking at an unknown period for the next few months whilst we are waiting for figures and reactions. I could make a prediction but at the moment it would be just a guess so I’d rather not do that until I’m more certain.

Best wishes

Andy

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