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Today BoE said the weakened global economic outlook and low growth are a threat to U.K.'s financial stability. There is a danger that investors question the sustainability in debt as the economies in the Eurozone and Asia deteriorate and a low inflation could result in lower growth and increase the burden of existing debts. Risks in U.K.'s housing market have not increased since June but high household indebtedness poses a risk.
The results of a stress test showed that the Royal Bank of Scotland and Lloyds Banking Group barely passed, the Co-Operative Bank Plc failed. All other banks passed the test. BoE Governor Mark Carney said the results show that the banks have the strength to serve the real economy - even in times of severe stress.
A set of key U.K. data was published at 09:30 GMT. The Retail Price Index declined by -0.2% in November from prior 0.0% and predicted +0.1%. On a yearly basis it declined to +2.0%. The RPI-X that excludes the volatile energy cost and food items, declined by 0.4% to + 2.0%. The Producer Price Index - Input, that reflects the inflationary pressures from manufacturers on the economy declined by -1.0%. on a monthly basis - less than the predicted -1.1%, year on year -8-8%. Analysts forecasted a decline by -8.3%. The Producer Price Index - Output Index rose +0.2%, beating forecasts predicting a decline by -0.3%. The HICP slowed to 1.0% last month from 1.3% in November year on year. It was the lowest rate of inflation since September 2002 and was below forecasts of 1.2%. On a monthly basis the index declined to -0.3%, 0.4% below forecasts and below the reading of +0.1% in the previous month. The HICP ex EFAT (that excludes the volatile energy cost and food items) slowed to +1.2%, not meeting forecast of +1.5%.
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