Interest rates will have to fall sharply on both sides of the Atlantic if central bankers are to help prevent a recession led by rising oil and food prices, falling house prices and a tighter credit climate, reports The Guardian .
Merrill Lynch said that US interest rates will have to fall to 2% over the next two years as the Federal Reserve tries to boost an economy on the brink of the first consumer-led recession since 1991.
Consumers, it said, were facing huge headwinds from a combination of "punishing" oil prices, tighter lending standards and rising unemployment.
The investment bank also forecast that the Bank of England's monetary policy committee will announce the first of three quarter-point cuts when interest rates are set tomorrow.
The MPC has so far been cautious about cutting rates too early in face of inflation pressures coming from high oil and rising food prices. However, Merrill said that a marked slowdown in UK economic growth to 2% from 3.1% this year would drive a shift in policy.
David Rosenberg, Merrill's US economist, said: "A more solid tone to the global economy and a weak dollar will help bolster exports, but it is doubtful this will be enough to prevent overall economic growth from declining. These headwinds are clouding what is already a pretty bleak outlook."
STAFF AT NORTHERN ROCK are in line for a Christmas bonus and above-inflation pay rise, despite its financial woes, reports The Telegraph.
The lender confirmed that the majority of its 6,000 staff will receive a £200 Christmas bonus and a one-off payment of 2pc of their salary in their December pay packet.
On top of that the company has agreed a deal with the union Unite to give staff a 4pc pay rise effective from the company's January pay day.
A spokesman defended the bank's decision to financially reward its staff despite the fact it still owed about £24bn of public money that it borrowed from the Bank of England.
He said: "Northern Rock and Unite feel that it is fair and recognises the efforts of staff in the company's current position.
"The situation should not deter from annual reviews for staff who have continued to show both loyalty and commitment."
OPEC, THE OIL PRODUCERS GROUP that pumps 40% of the world's crude, is expected to keep output levels unchanged despite strong calls from the West to increase production, reports The Times.
Saudi Oil Minister Ali al-Nuaimi told reporters at the start of the meeting: “There is nothing that justifies an increase or a decrease."
A decision not to increase production is likely to result in oil prices climbing back to their record high of $99.29 a barrel on November 21, after cooling in recent weeks due to expectations that output would rise.
This morning London Brent crude rose 57 cents to $90.10 a barrel, while US crude was up 46 cents to $88.78 a barrel.
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