A Brexit Carol
Theresa May may have been a little confused when she received a round of applause from the remaining 27 members of the EU in Brussels yesterday evening. It appeared to me akin to the polite applause that is given on a reality TV show when the gallant loser is sent home.
It is hard to see that Mrs May has much to be proud about when it comes to Brexit. She looks likely to survive an annus horribilis of her own making.
In the same way as Scrooge in Dickens “A Christmas Carol”, she has been visited by the 'Ghost of Brexit Past' who showed her the error of her ways in calling an election then making a complete hash of the campaign and having to be bailed out by the DUP.
The 'Ghost of Brexit Present' will show her that she is going to be defeated again in parliament over the inclusion of the Brexit date in the Bill and remind her that she is lucky these aren’t more serious issues.
But, it is the 'Ghost of Brexit Future' that will bring her most concern and, hopefully, lead her to change her ways (and some members of her Cabinet). The EU won’t commence stage two talks until it has clear proposals from Mrs May about what the U.K. expects from the trade deal. She will need to make sure of not falling into the same trap as with the first round of talks.
The U.K. negotiating team will need to be positive, firm and prepared to make good on its promises and threats if they are to provide the country with the basis it needs to survive Brexit and go on to prosper.
Central Banks unsure of new world order
It has been said that the U.K. is stuck in the past. As far as the post-apocalyptic world of low inflation is concerned, that may very well be true. The Central Bank meetings held this week, have been characterised by words and deeds that don’t seem to add up.
In the case of the FOMC, who will welcome a new Chairman next month, they raised rates but then seemed at a loss as to why they had done so, lamenting the lack of inflation despite a very strong employment market. They are struggling with the source and direction of future inflationary pressure yet are still looking likely to raise rates three times in 2018. And the market was hoping for some indication of four hikes!
The ECB also currently has no inflation concerns. Although having said that, Mario Draghi did raise the Central Bank’s expectations for both inflation and growth but then he said that accommodation would stay in place for “as long as necessary”.
The ambiguity even stretched to the Bank of England who do have problems with inflation that they, very handily, blame on the fall in the pound since the Brexit referendum. Why not take it all the way back to the departure from the ERM in 1992? That was a “proper” devaluation!
They see the chance of a disorderly Brexit as having receded (I am not so sure!). I would have thought the very fact of Brexit was, in itself, disorderly. But, they still have no plans to hike rates at all in 2018.
Note to Mark Carney: you did see inflation rose to 3.1% in November? Just checking.