The Bank of England yesterday took some preliminary measures to boost economic activity following the nation’s June 23rd vote to exit the European Union. These measures included an interest rate cut from .5 to a record low .25 percent along with some $10 billion in corporate bond purchases and $60 billion in government debt.
And there may very well be more to come…
While stocks were heavily sold-off initially following the Brexit vote, they have come roaring back, with some indices reaching fresh all-time highs. Investors have, for now anyway, been able to brush Brexit under the rug.
Whether or not they can continue to ignore the potential implications remains to be seen.
The Bank of England certainly wants to take steps to try to protect the British economy form the potential fallout.
The minutes of Great Britain’s Monetary Policy Committee spell out some of the committee’s concerns:
“Following the United Kingdom’s vote to leave the European Union, the exchange rate has fallen and the outlook for growth in the short-to-medium term has weakened markedly. The fall in sterling is likely to push up on CPI inflation in the near term, hastening its return to the 2% target and probably causing it to rise above target in the latter part of the MPC’s forecast period, before the exchange rate effect dissipates thereafter. In the real economy, although the weaker medium-term outlook for activity largely reflects a downward revision to the economy’s supply capacity, near-term weakness in demand is likely to open up a margin of spare capacity, including an eventual rise in in unemployment. Consistent with this, recent surveys of business activity, confidence and optimism suggest that the United Kingdom is likely to see little growth in GDP in the second half of this year.”
Hmm…. Sounds like potential trouble…
The stimulus rolled out by the BOE is significant, and with the possibility of more to follow may underscore the level of concern over Brexit’s possible effects on the local economy.
If the effects are as severe as some analysts have anticipated, it may only be a matter of time before markets start paying attention again.
And the bottom falls out…
We believe that stock markets are a house of cards ripe for toppling over, and further economic troubles in the U.K. and elsewhere could be a catalyst.
In the meantime, additional QE and low rates may keep currency values on the decline, eroding the purchasing power of their users along the way.
Where’s the stability?
Now may be a great time to consider some alternative asset classes. Hard assets like physical gold and silver may potentially provide a meaningful hedge against declining currency values and the economic unknown.
Explore your options for physical gold and silver ownership today. All you need to do is pick up the phone and speak with an Advantage Gold account executive today. Our precious metals account professionals will discuss the potential benefits of physical gold and silver ownership with you, and how they may potentially come in handy during these economically turbulent times.
We can even show you how easy it is to begin buying and holding physical precious metals using your IRA account.
Why wait? Don’t let stocks enter the next bear market or watch paper currency values drop further. Call us at 1-800-341-8584 to get started today.Tags: advantage gold, bank of england, brexit, economic outlook, european union, gold, interest rates, monetary policy, stimulus, U.K.