Bank of England signals worst is over

Bank of England signals worst is over

The bank’s twice-yearly Financial Stability Report issued on Thursday, says the credit markets “overstate the losses that will ultimately be felt by the financial system and the economy as a whole”. The view represents a big departure from its 2006 and 2007 warnings that risk was underpriced. It added that financial institutions would soon come to see that some assets now “look cheap”. The Pound was trading 1.9700 against the US Dollar and traders were happy to Buy Euros at 1.2600 against the Pound

John Gieve, deputy governor, said: “While there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually  in the coming months.”

In becoming the first big official institution to offer a cautiously optimistic outlook for the financial sector, the bank shrugs off indications of falling house prices, noting that most households have lots of equity in their homes. Figures from Nationwide Building Society on Wednesday showed the first annual fall in house prices for 12 years, with values in April 4 per cent down on their peak six months earlier and 1 per cent lower than a year earlier.