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All The Governor’s Men

Robert Moulin | Other | | Return|
Wednesday 26 August 2015

In the years since two inquisitive hacks uncovered the trail of wrongdoings leading from an inconspicuous Washington office block, it seems any story involving conspiracy or controversy must be a "something-gate".

Not to be out-done the financial world has its own nomenclature for describing the extraordinary. We like to apply a prefix though, and a consistent one at that.

Black Monday

Consider the funereally titled (and quite rightly so bearing in mind the economic events unfolding),"Black Monday", "Black Tuesday", and indeed "Black Wednesday". The rapidly shifting state of the Chinese economy has, only this week, prompted the press to resurrect the first of these.

How about this then - a new day to add to our lexicon, and this time with a highly positive moniker. Please be introduced to "Super Thursday". Once a month, on this day, the head of the UK central bank will release not one but three key pieces of economic data. That's big.

The first of these is now already past, so why the continuing fuss?

Interest rates.It's the decision regarding base lending rates, one of those three pieces of data, which continues to create a buzz.

Ok, so against all the odds decision makers here as in the U.S. voted to keep rates on hold. But, for how long? Commentators appear none too sure. One day its 'Fix your borrowing rate before its too late" - the next, "ten reasons why NOT to fix". Oh dear.

The metrics like the advice are mixed - very mixed - as was the vote. Unusually this time a dissenting voice, to increase now, was to be heard amongst the Governor's band of decision makers.

Us accountants are of course fairly adept at factoring in uncertainty. Even so, we still like to know what's happening and when. Impairments, provisions, financial instruments and defined benefit plans are all areas that could be affected down the line as discount rates start to move.

Amongst all the contradictions what do we know?Well, the cost of money is, at some point soon-ish, quite possibly going to rise by some amount. Thanks.

Of course when it does happen winners and losers there will be; not such good news for borrowers, but for savers (whatever the increase) it will surely be, rather super. What else do we know? Whenever change occurs, someone somewhere will find controversy.

But "Interest-rate-rise-gate?" I don't think so.

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