Belfast Telegraph

What a difference a day makes to our economy

They say a week is a long time in politics but in economic terms that could be contracted to 24 hours.

Since last sitting down to pen this column just one day ago, Portugal has had to go cap in hand to the European Union and International Monetary Fund for financial assistance, the European Central Bank has raised interest rates by 25 basis points and the Bank of England has kept to its historically low rate of 0.5%.

The inevitability of Portugal's refinancing was there for all to see and allowed the money markets to display one of its best-known traits in the form of buying the rumour and selling the fact.

As the whispers started that an impending bailout was on the cards, the price Portugal's government had to pay to borrow money soared. Now that the Iberian Peninsula country has admitted it needs help, the price of Portuguese government debt has eased back considerably.

Of course, that's if you take the European Central Bank's interest rate hike out of the equation.

Today's move by the financial muscle in Brussels had been well flagged and reflects the improving fortunes of the likes of Germany and France. Ironic then that it comes on the day another of the European Union's members is having to borrow more money to keep its monetary system fluid. Euro-skeptic? No, more like Euro-realist.

Meanwhile, Mervyn King and his Monetary Policy Committee - which sounds more and more like a 50s band to me - took heed of the still-shaky UK economy and kept rates on hold.

A sigh of relief was heard from borrowers from Bristol to Belfast and from Barry to Blairgowrie but the experts reckon the relief will be short-lived.

While the wider UK economy is still struggling to throw off the last remnants of recession, the Bank of England needs to keep inflation in check - as it is on the verge of getting a little out of control.