Yet again Mr Carney is trying to give us the heads-up of a forthcoming rate rise. The bank has now announced the quarterly inflation report, interest rate decision and minutes of the MPC meeting together. With only one of the nine MPC members voting for a rise, this was a couple less than expected. The economy still “in need of care” and only a “gradual increase” being on the cards I have a sneaking suspicion that the rise will be later rather than sooner.
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Greece: The IMF Verdict
It is being widely reported that the IMF is very wary of any financial contribution to a third Greek bailout. After not being repaid on time, who can blame them! However much more significantly IMF staff believe the elements so far agreed are not enough to make the Greek government’s debt sustainable.
The IMF think there needs to be some form of debt relief, even if only in the form of repayment grace periods, this is by no means an isolated view, but the problem is that this it is politically unacceptable to Germany. What will be the outcome? Only time will tell but the prognosis is not uneventful.
UK Economic Growth: Interest Rate Implications
So are we out of the woods? The economy grew 0.7% in the three months April to June 2015. We are back in positive territory with the increase coming from Services and Oil & Gas. Has the economy really moved out of slow motion? It is clear that the economy is far from perfect but for now growth appears to be back on track.
This presents a dilemma for the BofE policy committee, does this mean that an interest rate raise will be sooner rather than later? Will a rate rise stifle economic growth? I’m not convinced that there is sufficient confidence to make the call yet. The BofE Governor is certainly talking about it to prepare us.
China: Concerns of Regional Contagion?
Fears that China’s selloff could spiral beyond the domestic equities market has unsettled the rest of the Asia region in recent weeks. Signs of a deepening slowdown in China also have pushed currencies in Asia to multiyear lows this month.
Expect to see international investors withdrawing significant amounts of funds from the Asian region, transferring them to safer, less volatile markets and products.
The Silly Season Starts
With most of the country’s schools now on summer holiday and the resulting rush of staff to take holidays, it leaves the desks of the markets a lot thinner manned. Business levels drop and the more junior colleagues are sometimes left in charge. This traditionally is known as the “silly season”; volumes tail off and small otherwise un-news worthy or maybe just plain incorrect rumours and speculation abound that lead to market movements that defy logic and sense.
Greece: Greek Parliament Vote
In the early hours of today Greek MPs voted for the bailout, including hard-hitting austerity measures. However, the government lost its majority. This still leaves the other EU countries parliaments to agree the bailout before it is finalised.
The Shanghai Stock Market: Update
The Shanghai Market closed up rebounding nearly 20% from the four-month low hit on Thursday. It seems to be working. But it is still nearly 20% down from the market high in June.
The latest measures from regulators involved cracking down on “grey-market” margin lending, which is flooding the market with leveraged stock bets. They will also clamp down on investors creating fake trading accounts. Looks like the Chinese authorities are learning fast about free market economics!
Greece: An After Thought / Reflection
I agree with the sentiments of BBC Europe Editor Katya Adler: “The deal brings to mind two thoughts:
Prime Minister Alexis Tsipras said he had democracy on his side 10 days ago after the majority of Greeks voted “No” – as instructed by him – in a referendum on tough bailout conditions.
Yet he has now signed up to those very conditions and more.
Another thought is that Greece is not alone in now facing a loss of national sovereignty.
So are all the other countries in the eurozone.
There has long been talk of the need for closer union and harmonisation in the single currency.
This crisis over Greece makes its tightening, unifying and strengthening seem more urgent – to preserve the credibility of the currency.
In the end, it was not the plight of tiny Greece that drove eurozone leaders to overcome pride, suspicion, distrust and misgivings to reach some kind of accord. It was self-interest.
Remember, the eurozone is only just clawing its way out of its 2008 financial crisis.
Greece’s fate affects the economics and the politics in every single eurozone nation.”
Greece: The Agreement – A Brief Analysis
Newsnight’s correspondent Duncan Weldon’s tweets on the agreement:
1. Almost no one coming out of this well.
2. Greek govt went to the brink causing huge damage to economy & then got a deal which falls well short of aims.
3. German govt showed an ugly side, aiming for humiliation rather than compromise.
4. IMF continually ignoring its own rules and lending without firm debt restructuring commitments.
5. ECB got dragged into the politics risking image as an independent central bank.
6. And once again – the Greek people are the real losers of it all.
And as Charlie Robertson, Chief Economist at RenCap tweeted: “Tsipras told the Greeks they could stay in EUR and avoid austerity – it’s taken 5 months to discover this was untrue”.
Greece: The Agreement
After what was a marathon 17 hour session, today’s deal buys time for Greece to negotiate a third bailout. It is centred around Greek assets being put into a special EUR 50bn rescue fund, half to rescue the banks now and bridging finance for its short term needs, together with the “re-profiling of debt maturities”.
This then has to be ratified by the Greek parliament, which is not guaranteed. With no debt forgiveness given, it does feel like there is the possibility for future issues: has the can just been kicked another 3 years down the road?
Solutions Edge 
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