For months I have been saying interest rates need to come down to 2-3%. The authorities now seem to agree.
For months I have also been saying our public deficit is too high and rising too fast, and needs to be controlled if we cut interest rates to stimulate the economy.
Now the Treasury agrees with the first part of that forecast. I have been using £120 billion as the borrowing figure for 2008-9. The Treasury is now preparing us for a figure above £100 billion on Monday when they announce their new forecasts, followed by another high figure for 2009-10.
Let’s hope they soon get the third message. Borrowing needs to be at a sensible level, to sustain the lower interest rates we need. If they do not show a convincing path to modest levels of borrowing, they will find it increasingly difficult to borrow all the money at a sensible rate, and could feel more strain on the currency.
The quickest and easiest way of controlling borrowing would be to change the way they support banks, and to sell some of the banking assets they already own.