Sky News business editor Michael Wilson

Calm down, dears. Not as bad as you thought. There was a problem, and we all got a bit carried away and went a bit too far the other way.

It'll be all right in the end. A rough translation of the Bank of England's Financial Stability Report. It was unusually, some would say suprisingly, positive.

Here's the Bankspeak: 'The pricing of risk in credit markets seems to have swung from being unsustainably low last summer to being temporarily too high relative to fundamentals. So, while there remain downside risks, the most likely path is that confidence and risk appetite will return gradually.'

While the Bank of England is clearly anxious to foster calm and stability, and while the big banks may start to restructure their business to something like normal, there was a warning of the rest of us.

Households will still find things very tough, particularly as some see their mortgage rates jump by as much as 2.5% as they have to take on more expensive deals. My further worry comes from Jim O'Neill, the Chief economist of the giant Goldman Sachs.

Economists are two a penny, but Mr O'Neill is a star performer, who most recently correctly forecast the collapse of the US property market.

He says that the UK, with its heavy reliance on financial services, was 'in the eye of the storm of a deleveraging world economy', and that homeowners would suffer. 'House prices are going to go through negative changes' he said.

'It's going to be a challenge for UK policymakers.' And that challenge is precisely what we've been pointing out for the past six months.

While the Fed in the US feels a freedom to cut interest rates agressively, the inflation pressures here make it much more difficult.

We're currently running the story that petrol could cost one pound fifty a litre in 2009, for example, and we've already had the OPEC predictions of a $200 barrel of oil.

In these times no-one can predict anything with much accuracy, but it's clear that the Bank has limited room to help out with interest rates, or indeed help the banks out of their current problems.

We don't mind a cuddle from the Old Lady of Threadneedle Street, but that's as far as she's going to go.

Comments

[andre , Bromley, Kent 2 May 2008 09:04:32]

the price of Brent crud is the same for all countries

BUT
in the Lebanon, the 95 unleaded litre is 40p and in the usa is 50 p,
oil companies make money and pump stations make money too.

how come in the UK the litter now is
£ 1.10 and going higher....government, oil companies and pump stations are ripping us off....

I suggest to fight back the oil companies and pump stations….we all use one company ie BP and boycott Shell, till Shell drop its prices, once Shell drops it price, we use Shell and boycott BP till its drop its prices…repeat again till we know its a reasonable price.and we have to fight the government not to implement the 2p rise even to drop some taxe on petrol and diesel.

[Graham London 1 May 2008 16:33:51]

Despite the Fed's aggressive actions on interest rates and swapping governemnt bonds for dubious securities and (US government's mortgage bank)Fannie Mae's freedom to help mortgagees, US householders are suffering far worse than anyone could have foreseen (13-30 percent home price reduction, depending on location). British homeowners on the move who need to sell their homes or those with fringe jobs and who have 90 percent plus mortgages should probably cut and run now - get out of the owner-occupier market ASAP.
Further evidence comes in the form of today's announcement by the US's B&Q equivalent and top builders' merchant (Home Depot) - store closers, redundancies and curtailing all (50) new store development projects. Every day we hear that global and domestic banks are cutting back on spending, mainly staff, consultants and technology. These will all have a knock-on effect.
The BoE is probably powerless to intervene effectively to halt what amounts to a major correction that has still to gather pace and is way overdue.
It may be true that the billions of write-downs in the value of mortgage-backed securities may not be as bad as assumed. However, if home prices, employment and inflation pressures continue here as in the US, the phrase 'self-fulfilling prophecy' comes to mind.
Two professional associates in New England have re-trained and become home 'stagers' and landscapers to help people engineer 'best in neighbourhood kerb appeal', the only way to obtain viewings!

[Khalid 1 May 2008 16:11:30]

Sir
Indeed what the nation as a whole needs is for [Billy Ray Martin] to put [Your Loving Arms] around the BoE and thank the lord that there lies within, someone who cares for us mere mortals.
The UK has by far and large been practising the art surroundign harsh times and as you rightly suggest, no more can be done by the powers to be unless as all means surrounding social tolerance remain exhausted.
Now, thus far as utilities etc, they have within their remit to enusre greed does not give way to actuals and my advice would be to read the small print and ensure any deal offered does not put you in a worse case scenario.
Failing that, for those with mortgages, the current issues are out of your control, so take your time, shop around and make sure that by the time you sign up to a better deal, you make up the differenc elost and bring your acount back to normal.
There, there, there, was'nt that bad wa sit.
Oh by the way, nearly forgot....for those who are currently on E.om Energy Extra Saver Online Tarrif, you may no longer need to pay by direct debit to enjoy the benefits. Please watch this space and I will blog all about it once Elizabeth France has duly adjudicated on this most perverse of daylight robbery!
Oh Happy days, Oh Happy days.

[Michael Cornwall 1 May 2008 15:03:17]

Lovely to hear the word positive. okay I will calm down.But actually my initial reation is: That is what I would call leadership,and that is what the country needs, leadership and communication. I take back alot of my negative thoughts about The Bank of Engalnd.