The benefits of low investment

Article Abstract:

Investment has been low in the United Kingdom since the trough of the recession in 1992, compared to the previous 1980s recession. This worries policmakers, but could benefit stockholders who have received funds from stock buybacks and takeovers. Return on capital has increased since the capital stock has expanded little. Return on capital could drop in 1998 due to a slowdown in the economy and the strength of pound sterling. There is less danger of investment in unprofitable projects in the 1990s, but investment will have to be raised eventually and this rise could cause the rate of profit to drop.

New Plant & Equipment, Capital investments

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The Bank of England's knowledge gap

Article Abstract:

The Bank of England's Monetary Policy Committee needs to forecast what the inflation rate will be in two years time if it is to be able to set an appropriate base rate. This is hard to predict accurately. Wage growth increased from 4.25% to 4.75% since November 1997 and this, together with low unemployment, may raise inflation and force banks to raise their base rates. However, this may compound the problem because increased mortgage rates will increase RPI inflation and increase wage demands. Unemployment is set to increase in the summer and wage increases should fall during 1999.

Prices, Interest Rates, Bank of England, Economic policy, Inflation (Economics)

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