2010 A Year of Economics: the Bank of England

To deal with the effects of a negative output gap the twin pedals of fiscal and monetary policy were pressed to throttle speed.

Interest rates remained at an all-time low at 0.5% to encourage borrowing.  Quantitative easing injected £200bn into the econonmy, with effects on inflation yet to be fully seen.  Currently, inflation according to the CPI index lies at 3.1%.

Inflation levels hit the headlines as it exceeded 3%, forcing Mervyn King to write a letter to the Chancellor explaining the situation.

There were even question marks raised about the credibility of the Bank of England.  Although dismissed by the Bank of England, many asked whether the bank had virtually abanoned its 2pc target.  There were also accusations that Mervyn King had become "too political" by endorsing the coalition's spending cut plans. 

2010 A Year of Economics: Sovereign Debt Crisis

The infamously so called 'PIGS' (Portugal, Ireland, Greece, Spain) of Europe threatened the stability of the continent. They had built up unsustainable budget deficits.

In May, Greece were rescued with a $110bn package. In November, Ireland were given a $85bn emergency loan. Both countries embarked on deep austerity cuts, sparking fierce riots on the streets of Athens.

The Eurozone was called into question as it limited the powers of its members to control their debts. They were unable to devalue their currency which would have mitigated their woes.

2010 A Year of Economics: Deficit and Debt

As we approach the end of 2010, I will be blogging on the top economic stories that have dominated our lives this year.

Deficits and debts throughout Europe and the US threatened the sustainability of public finances. The UK, notoriously, had the highest levels of debt within the G20. David Cameron coined the phrase, 'the age of austerity', marking the start of unprecedented cuts in government expenditure. Amongst many cuts in spending, the reform of the welfare system created the biggest headlines - child benefit was removed for many parents.

As we begin 2011, taxation will also increase as VAT rises to 20% and transport costs increase, causing more misery for motorists.