Posted by Flora Maudsley-Barton | February 18, 2013
What challenges will Mark Carney face at the Bank of England?
There is to be a new Governor of the Bank of England in July, Mr Mark Carney takes over. The face is not the only thing changing, he promices big changes to policy.
Mr Carney, the man headhunted by Chancellor George Osborne to kick-start the British economy, has hinted strongly at a sharp about-turn in direction.
He has suggested that central banks should switch their aims from controlling inflation and instead putting growth at the top of the agenda. This means that if inflation rises, interest rates don’t also necessarily have to go up to keep it in check.
The prospect of soaring inflation, combined with rock-bottom interest rates could signal another round of misery for Britain’s savers who have already seen their hard earned savings whittled away by successive rounds of money printing.
A leap in Britain’s current rate of inflation, 2.7 per cent, is on the cards over the next year according to the Investment Director at Fidelity Investments.
He says that it is a big worry. Any investor should be thinking about how to protect themselves now. They need to be invested in assets which are historically a hedge against rising prices. Equity funds give investors the opportunity to benefit from companies.
A side-effect of any new Bank of England policy could be a falling pound. Sterling has already hit an 11-month low against the euro. Another potential effect is that if markets feel inflation is going to get out of control that could put a further drag on the pound. Companies who export goods are likely to do well because the exchange rate is in their favour.
Funds investing in these sorts of British firms could be a good move for growth-hungry investors. They also will also allow investors to reap an income from dividend pay-outs, Of course the value of equity based investments may fall as well as rise. Clearly the issue is deciding where and when to invest, either in the Pension pot or Stockmarket based saving in general.