Panmure Liberum is a new force in UK Investment Banking and Corporate Broking

By Simon French, Chief Economist and Head of Research 

Last week saw two important milestones for the UK public finances. The first was an updated Bank of England forecast downgrading the UK growth outlook. The second was the latest assessment from the Office for Budget Responsibility (OBR) on the government’s progress against its self-imposed fiscal rules. Whilst the Bank of England’s workings were made public enabling a post-mortem of its decision to cut interest rates, the OBR’s document was, as convention dictates, a private missive to Chancellor Rachel Reeves. In doing so, the OBR provided Reeves with her first official guide as to whether she needs to stick, or twist, following her October Budget. Speculation is rife that the Chancellor will need to twist. A range of external economic forecasters have suggested that higher borrowing costs on global markets, the slowdown in consumer and business sentiment, and higher energy costs will combine to eliminate the modest headroom Chancellor Reeves left herself in the Autumn.

In his recent address to the World Economic Forum in Davos, President Trump was unequivocal. “I'll demand that interest rates drop immediately. And likewise, they should be dropping all over the world”. These two sentences moved bond market interest rates further off their pre-Inauguration highs. The US President’s lack of nuance is perhaps his greatest communication gift. For central bankers skilled in conditional linguistics this is quite the culture clash. Trump parked his hulking snowplough on the manicured piste of the world’s central banks. It looks like this piece of heavy machinery is unlikely to shift for four years. For a man who made his name in highly-leveraged real estate deals, Trump’s preference for cheaper money and lower interest rates appears inevitable.

As California wildfires continue to develop, Panmure Liberum updates its economic and insured loss estimates. The economic losses are likely to be the largest on record for the state at c.$250-275bn. This compares to a total of c.$185bn economic losses across all of California’s wildfires in 2018.