UK: Hawkish line of Bank of England

October 9, 2007

Dear friends, According to the UK chart, the outlook for the British economy is not very good, especially after the dual malefic period Ma/Sa period starts on 18 May 2008. Saturn is natally weak, being placed at 2° 17' Leo H12. Its dispositor, L12 Sun is at 19° 00' Sagittarius H4, where it afflicts both H4 and H10. Major period lord, L8 Mars, is placed at 20° 40' Aries H8, and hence is not weak. However, it is afflicting H2, H3 and H11, where L4 Jupiter is placed at 10° 46' Cancer H11. Its dispositor L11 Moon is weak but well placed at 28° 20' Gemini H10. Both these houses, H10 and H11, are afflicted. Hence, during the abovementioned period, the natal placements mentioned become more vulanerable to transit setbacks. Presently, the Ma/Ju period is running, with the transits not very helpful. Sub-period lord, transit L4 Jupiter at 21° 42' Scorpio H3, is coming under the

exact aspect of natal Rahu at 22° 59' Pisces H7 on 18 October 2007. Tomorrow, L12 Sun at 23° 59' Virgo H1 becomes exactly conjunct the nodal axis. At that time, L11 Moon will pass over the same placement. This adds to the difficult combination in Leo H12 of the chart, with transit L6 Saturn at 10° 34' Leo being conjunct transit Ketu at 12° 34', with transit L2 Venus, at 8° 20' Leo H12, becoming ever closer to the tightening conjunction of Saturn and Ketu. Given the adverse transits, it would not surprise me that the financial market participants do not react well this week to the attached pronouncements of Mr. Mervyn King, the Governor of Bank of England. Mr. King is touting a firm line with regard to interest rates. He is against reducing them like the US Federal Reserve recently decided to do, in order to quell market unrest. He is also expecting more financial market turmoil. Best wishes, Thor King Suggests He's Reluctant to Cut Rate, Sees More `Turmoil' By Jennifer Ryan and Brian Swint Oct. 10 (Bloomberg) -- Bank of England Governor

Mervyn King suggested he's reluctant to cut interest rates to shield lenders from higher corporate borrowing costs and predicted more ``turmoil'' in financial markets. ``The current turmoil in financial markets is not over,'' King said in a speech in Northern Ireland yesterday. The benchmark interest rate ``will not be set now to insulate the banking system from the re-pricing of risk. But you can be sure that we will do whatever is necessary to keep inflation close to the 2 percent target.'' King's comments suggest he isn't yet prepared to follow U.S. Federal Reserve Chairman Ben Bernanke in cutting interest rates to support growth. U.K. inflation won't remain around the central bank's 2 percent target unless the economy slows, King said, repeating a forecast made before the increase in credit costs. ``We will be monitoring closely the impact of tighter credit conditions on demand and output in the coming months,'' King said. ``With

investors more wary of risks, banks will find it harder to raise funds. So credit will not be so readily or cheaply available to businesses and households.'' The remarks come after the U.K. government extended a guarantee it had already made to Newcastle, England-based Northern Rock Plc after the mortgage provider sought emergency funding from the central bank, spurring the first run on a U.K. bank in more than a century. Insolvency Law King said the panic pointed to the need for a special insolvency law for U.K. banks to protect depositors, insurance requirements for smaller lenders relying on wholesale funding markets, and more-discreet ways of arranging rescue financing. He also said the bank has ``achieved our primary objective in the money markets'' of keeping the rate firms charge each other for overnight loans in line with the benchmark interest rate, currently at 5.75 percent. Rates for longer-term

borrowing still reflect banks' reluctance to lend to each other after the U.S. subprime mortgage market collapsed. The London interbank offered rate for three-month loans was 6.25 percent yesterday, according to the British Bankers Association. While that's down from a nine-year high of 6.9 percent on Sept. 11, the rate still hasn't returned to the 6.05 percent level of Aug. 1, before credit markets seized up. Eleven of 48 economists predicted the Bank of England will cut the benchmark rate by quarter-point at its next decision on Nov. 8, according to a Bloomberg News survey published Sept. 28. Slower Growth There are some signs that higher corporate borrowing costs and the highest central bank rate in six years are cooling the economy. Growth in U.K. service industries weakened to a 13-month low last month, while manufacturing growth slowed more than expected, according to surveys by Chartered Institute of Purchasing and

Supply and Royal Bank of Scotland Group Plc. The U.K. inflation rate, which was the highest in a decade earlier this year, fell to 1.8 percent in August, the lowest since March 2006. The Office for National Statistics reported the decline Sept. 18, about a month after the central bank signaled its benchmark rate may need to rise to curb inflation. The Bank of England is watching companies' willingness to charge customers more, gains in commodity costs amid record oil prices and Britons' expectations for future price increases, King said. ``Even though inflation is close to the target and pay pressures are muted, we will continue to look ahead and monitor the risks to inflation we identified in August.''

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