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"Now Is The Time To Plan For The Next Recession," Think Tank Urges Britain
09-11-2019, 03:35 AM,
#1
"Now Is The Time To Plan For The Next Recession," Think Tank Urges Britain
"Now Is The Time To Plan For The Next Recession," Think Tank Urges Britain 

<span property="schema:name" class="field field--name-title field--type-string field--label-hidden">"Now Is The Time To Plan For The Next Recession," Think Tank Urges Britain </span>

<div property="schema:text" class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Britain isn't ready for a recession and must consider new innovative countercyclical buffers when it arrives, the <a href="https://www.resolutionfoundation.org/publications/recession-ready/">Resolution Foundation</a>, a think-tank, said on Monday.</p>

<p>Researchers at the foundation said the Bank of England (BoE) would have difficulty fighting off a recession because interest rates are already near the zero lower bound.</p>

<p><a data-image-external-href="" data-image-href="/s3/files/inline-images/2019-09-10_08-29-57.png?itok=7Q76SL2p" data-link-option="0" href="https://www.zerohedge.com/s3/files/inline-images/2019-09-10_08-29-57.png?itok=7Q76SL2p"><picture><!--[if IE 9]><video style="display: none;"><![endif]--><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-29-57.png?itok=RChCXfSZ 1x" media="all and (min-width: 1280px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-29-57.png?itok=RChCXfSZ 1x" media="all and (min-width: 480px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-29-57.png?itok=RChCXfSZ 1x, https://zh-prod-1cc738ca-7d3b-4a72-b792-...k=RChCXfSZ 2x" media="all and (min-width: 1024px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-29-57.png?itok=RChCXfSZ 1x" media="all and (min-width: 768px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_mobile/public/inline-images/2019-09-10_08-29-57.png?itok=7Q76SL2p 1x" type="image/png"></source><!--[if IE 9]></video><![endif]--><img data-entity-type="file" data-entity-uuid="d1fcd444-2721-4412-a8b8-378cfed77772" data-responsive-image-style="inline_images" height="367" width="500" src="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/2019-09-10_08-29-57.png" alt="" typeof="foaf:Image" /></picture></a></p>

<p>In the last recession, the BoE was able to cut interest rates from 5% to near zero. Now rates are .75%, which means the next round of cuts will have minimal stimulative effects on the real economy. </p>

<p><a data-image-external-href="" data-image-href="/s3/files/inline-images/2019-09-10_08-29-09.png?itok=fsueExnb" data-link-option="0" href="https://www.zerohedge.com/s3/files/inline-images/2019-09-10_08-29-09.png?itok=fsueExnb"><picture><!--[if IE 9]><video style="display: none;"><![endif]--><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-29-09.png?itok=9iOQZPvK 1x" media="all and (min-width: 1280px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-29-09.png?itok=9iOQZPvK 1x" media="all and (min-width: 480px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-29-09.png?itok=9iOQZPvK 1x, https://zh-prod-1cc738ca-7d3b-4a72-b792-...k=9iOQZPvK 2x" media="all and (min-width: 1024px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-29-09.png?itok=9iOQZPvK 1x" media="all and (min-width: 768px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_mobile/public/inline-images/2019-09-10_08-29-09.png?itok=fsueExnb 1x" type="image/png"></source><!--[if IE 9]></video><![endif]--><img data-entity-type="file" data-entity-uuid="af008521-4674-4866-b223-6fdb5075acc4" data-responsive-image-style="inline_images" height="422" width="500" src="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/2019-09-10_08-29-09.png" alt="" typeof="foaf:Image" /></picture></a></p>

<p>A foundation spokesperson said quantitative easing delivered about two-thirds of support to the economy during the last recession by reducing longer-term interest rates. But with GB10Y already near the zero level, quantitative easing might not be as effective as before. </p>

<blockquote>
<p>"Today even long-term rates are now very close to zero, with 10-year government borrowing costs now below half a percent," a foundation spokesperson said.</p>
</blockquote>

<p>The think-tank warned that deep interest rate cuts into negative territory along with quantitative easing could have very little stimulative effects, which means the BoE currently has a depleted tool kit ahead of a recession that could strike in the near term. </p>

<p><a data-image-external-href="" data-image-href="/s3/files/inline-images/2019-09-10_08-30-30.png?itok=MBWwLjbP" data-link-option="0" href="https://www.zerohedge.com/s3/files/inline-images/2019-09-10_08-30-30.png?itok=MBWwLjbP"><picture><!--[if IE 9]><video style="display: none;"><![endif]--><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-30-30.png?itok=N6ZNHLvv 1x" media="all and (min-width: 1280px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-30-30.png?itok=N6ZNHLvv 1x" media="all and (min-width: 480px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-30-30.png?itok=N6ZNHLvv 1x, https://zh-prod-1cc738ca-7d3b-4a72-b792-...k=N6ZNHLvv 2x" media="all and (min-width: 1024px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019-09-10_08-30-30.png?itok=N6ZNHLvv 1x" media="all and (min-width: 768px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_mobile/public/inline-images/2019-09-10_08-30-30.png?itok=MBWwLjbP 1x" type="image/png"></source><!--[if IE 9]></video><![endif]--><img data-entity-type="file" data-entity-uuid="b9457e7b-d73b-4b2e-ade6-3a67d6c7863a" data-responsive-image-style="inline_images" height="343" width="500" src="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/2019-09-10_08-30-30.png" alt="" typeof="foaf:Image" /></picture></a></p>

<p>The foundation said global central banks and countries are actively reviewing tools available for central banks amid the threat of a worldwide recession. It said the UK and BoE have been slow to review their policy tool kits, has called for a thorough evaluation of the available tools. </p>

<p>Researchers asked the government and central bank officials to review the pros and cons of a higher inflation target.</p>

<p>The think-tank also called for shovel-ready infrastructure projects and direct payments to households to cushion the economy during the upcoming downturn. </p>

<blockquote>
<p>"Now is the time to plan for the next recession – because the one thing we know for certain is that it will happen," James Smith, Research Director at the Resolution Foundation, said.</p>

<p>"The UK today faces the highest recession risk since the financial crisis, and lower-income households are now more exposed to a downturn than they were back then."</p>
</blockquote>

<p>The foundation's report comes as Britain's economy <a href="https://www.zerohedge.com/news/2019-08-09/uk-economy-shrinks-first-time-2012-no-brexit-fears-fester">contracted in Q2 for the first time in seven years</a> as the cloud of uncertainty brought by Brexit discouraged business investment and prompted some consumers to put off major purchases as well.</p>

<p>For the three months ended June, GDP contracted 0.2% compared to the previous quarter, according to the Office for National Statistics. That's lower than what experts had expected (they had forecast growth to be flat). The biggest drag was a drop in manufacturing output, which caused the production sector to shrink by 1.4%. Construction also weakened while critical service sector yielded no growth at all.</p>

<p>The contraction marks the first time the economy has shrunk since 2012.</p>

<p><a data-image-external-href="" data-image-href="/s3/files/inline-images/2019.08.09econ.png?itok=op6STT3v" data-link-option="0" href="https://www.zerohedge.com/s3/files/inline-images/2019.08.09econ.png?itok=op6STT3v"><picture><!--[if IE 9]><video style="display: none;"><![endif]--><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019.08.09econ.png?itok=EnAciuXW 1x" media="all and (min-width: 1280px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019.08.09econ.png?itok=EnAciuXW 1x" media="all and (min-width: 480px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019.08.09econ.png?itok=EnAciuXW 1x, https://zh-prod-1cc738ca-7d3b-4a72-b792-...k=EnAciuXW 2x" media="all and (min-width: 1024px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_desktop/public/inline-images/2019.08.09econ.png?itok=EnAciuXW 1x" media="all and (min-width: 768px)" type="image/png"></source><source srcset="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_mobile/public/inline-images/2019.08.09econ.png?itok=op6STT3v 1x" type="image/png"></source><!--[if IE 9]></video><![endif]--><img data-entity-type="file" data-entity-uuid="b08ef7db-5446-479e-a87d-15c201314623" data-responsive-image-style="inline_images" height="391" width="500" src="https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/2019.08.09econ.png" alt="" typeof="foaf:Image" /></picture></a></p>

<p>The contraction comes amid rising fears that Britain could crash out of the European Union on Oct 31 without a deal as negotiations with the EU remain at an impasse. Prime Minister Boris Johnson has committed to leaving on Oct 3. with or without a deal, causing the economy to weaken and likely usher in a recession.</p>
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<a href="https://www.zerohedge.com/users/tyler-durden">Tyler Durden</a>
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<span property="schema:dateCreated" content="2019-09-11T06:45:00+00:00" class="field field--name-created field--type-created field--label-hidden">Wed, 09/11/2019 - 02:45</span>

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