Britain needs negative interest rates to claw its way out of recession but will instead cut them to 1pc and flood the market with cash through Japanese-style "quantitative easing", according to Legal & General Investment Management.
House prices will fall another "10pc-15pc" by the end of the year but the FTSE 100 will recover to close at 4,800, L&G said in its Fundamentals briefing for 2009.
Under its forecasting model for the UK economy, L&G calculates that interest rates need to be slashed to -1¼pc by the end of next year. As rates cannot fall below zero, L&G economist Tim Drayson expects the Bank of England to cut rates to 1pc and follow the US Federal Reserve in introducing "quantitative easing", where central banks inject money directly into the markets to kickstart lending and investment.
A MULTIBILLION-POUND PACKAGE of measures aimed at getting the banks to restart lending to business will be announced by Alistair Darling next month, The Times has learnt.
The Chancellor is considering a national lending scheme under which the Government would guarantee new lending to businesses of all sizes as one of his leading options.
If past loan schemes are followed, the Government would cover most of the risk on each loan, possibly up to 80 per cent, and the bank would bear the rest. The taxpayer could be faced with a big bill if companies defaulted, as some certainly would. The default rate of firms involved in government loan schemes since 1981 is 28 per cent.
MORGAN STANLEY REPORTED A WORSE-than-expected fourth-quarter loss of $2.2bn (£1.4bn) from continuing operations, prompting a downgrade in the investment bank's senior debt rating, The Independent reports.
The bank's second quarterly loss in the last five quarters was driven by $1.7bn of write-downs on corporate loans, $800m on securities held in bank operations and $1.8bn of investment losses. The numbers would have been worse were it not for gains of $2.1bn from debt repurchases and a $2bn accounting gain from the reduced value of Morgan Stanley's own debt.
Moody's cut its senior debt rating, excluding debt guaranteed by the Federal Deposit Insurance Corporation, by one notch to A2.
SIMON NIXON, THE MULTI-MILLIONAIRE founder of the internet price comparison site moneysupermarket.com, yesterday announced he will step aside from running the company, reports The Independent.
Mr Nixon, 41, will continue to work at the company for one day a week as executive deputy chairman, focusing on developing new products.
The entrepreneur said he wants more time to work on new projects. He still owns 54.5 percent of moneysupermarket, but said that now the company has floated and has grown, he wants to hand over its time-consuming day-to-day management.IFAonline
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