Halister News

(Bloomberg) -- A commitment by U.K.’s new government to improve infrastructure such as housing, transport, energy costs and communications infrastructure could lower business costs, making the country attractive, JPMorgan’s Malcolm Barr writes.

• Such actions wouldn’t antagonize the country’s trading partners as much as corporation tax cuts, which is important at a point when the U.K.’s relations with them are in flux
• Some failings of the U.K. infrastructure are becoming chronic with the country at risk of energy rations for manufacturers and repeated criticism of transport infrastructure
• Monetary policy’s ability to offset shocks to demand is increasingly limited, so fiscal policy has to play a bigger role
• JPMorgan’s growth forecast for the U.K. includes a change in the fiscal path but, given the uncertainties around the impact of Brexit, there may be little clarity on the size of any programs until closer to the Autumn Statement
• NOTE: Policy emphasis will shift toward fiscal steps over the next 12 to 18 months; may provide a floor for gilt yields, UBS WM says, while Deutsche Bank says the case for higher rates rests on fiscal policy taking some of the burden off monetary policy