Not a new normal
[Re: Is Mark Carney right that the “new normal” for interest rates will be 2.5 per cent?, yesterday]
Mark Carney has pointed to financial market expectations to support his assertion that the “new normal” for rates will be around 2.5 per cent. He is wrong. Financial markets do not forecast the future, they register expectations born of extrapolation and sentiment. The current assumption is sustained loose monetary policy, fuelling asset bubbles and debt growth as investors seek returns in a low-growth world. The financial system is more fragile as a result, which increases the risk of real interest rate shocks in coming years. Macroprudential policy – increasingly the mythical defender of all promises – is untested, and likely to be emasculated by the tension between growth and financial stability. Meanwhile, the shadow financial players like peer-to-peer lenders threaten to render the Bank’s rate-setting tool impotent. The “new normal” is born of hope, it is not a strategy for the future.
Dr Bob Swarup, Camdor Global
[Re: Firms fear a backlash over flexible work, yesterday]
Business must not adopt a short-sighted hostility to those wishing to work from home. Flexible working is the future: both firms and employees can gain.
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