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Will the Pound Continue to Weaken?

By   /   January 29, 2013  /   No Comments

The Sterling, the Pound keeps losing value. Why? There are a few good reasons why and we will discuss them now.

The boost the Pound got for the Olympics has come to an end. Why? There are policy reasons for that. First, Britain has been following what is called fiscal austerity. This has been a bit contrary to what other countries have been doing, which is to spur growth. They are practicing this even though they have been seeing sluggish growth over the last several years.

However, the Bank of England has been using Quantitative Easing to spur the Pound and the economy with varying degrees of success. Bluntly, it has not been able to give the economy the kick it has been hoping for. The bottom line is that we will need more stimulus packages this year, or we will have flat or no growth.

It is conceivable that the Bank of England will follow what it did last year. They will start the process by increasing lending. If that fails to spur along economic growth, then it will lower the prime lending rate. This means a weaker Pound.

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