The UK’s rebalancing needs go far beyond what the FPC can recommend
The Bank of England’s financial policy committee’s (FPC) release of recommendations on the housing market on Friday has attracted significant attention across markets. GBP has interest for two reasons: firstly, preventing overheating where possible (i.e. outside of London) through macro-prudential measures initially will affect the timing of monetary tightening; secondly, if general measures aimed at housing threaten overseas interest into the UK’s real estate market, the subsequent outflows would hurt the currency, especially with current valuations. Even if both factors are benign for now, the UK’s financing gap will continue secular widening without rebalancing.
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