00:00Well, let's get more on all this now. Vicky Price is an international economist.
00:04Hello, Vicky. The government debt, energy price hikes, inflation concerns, they are not exactly new.
00:10So why is it all hitting bonds so hard right now?
00:15Well, it's strange, really, because if anything, what we're seeing is that there is perhaps more oil than we thought
00:21coming through the Strait of Hormuz.
00:23So prices have, yes, they went up again. Crude oil prices went up again a little bit today.
00:30But overall, they seem to have stabilized even just below $100 a barrel in the last day or so.
00:37So it looked as if perhaps we can get over this crisis without too much damage.
00:41And the economists have proved more resilient. But actually, that is the problem.
00:44It is that the economists have continued to grow. You've seen that happening in Europe.
00:49We had some rather positive results coming out even from Germany.
00:52Yes, of course, France, that you mentioned earlier, is in a bit of a trouble.
00:56But other countries are doing reasonably well, including Germany, which seems to be resuming some industrial production and growing.
01:04We've seen, of course, in the UK as well, some slightly better figures.
01:08And the markets have obviously decided that actually all this may lead to higher inflation in the future and that
01:14interest rates will be going up.
01:16We've already seen the European rates go up, the US rates go up.
01:19The UK's rates are likely to go up in November, one of the reasons why the pound is also strengthening.
01:25So it's a strange time for this to happen.
01:28You could argue that it's all to do with debt, possibly.
01:32But actually, long-term interest rates, which are reflected in the yields, basically, that the government has more or less
01:41to pay for the borrowing that it does, have basically adjusted upwards.
01:48And that affects, unfortunately, mortgage rates, the costs for businesses to borrow.
01:54And if anything, that will slow down that resilience that I was talking about before.
02:00So there's a little bit of schizophrenia going around, in my view.
02:03And maybe we'll all sort itself out in the next few days when the markets see what perhaps the path
02:10ahead is for the economies.
02:12Is there anything that governments can and should be doing?
02:18Well, first of all, in terms of the inflation side, which is the one, of course, that baby is motivating
02:23what's going on in the capital markets right now, governments have already stepped in across Europe.
02:27They have reduced taxes on fuel.
02:30There is a real problem with diesel.
02:31They've reduced taxes in a number of areas to try and bring inflation down.
02:36It happened also in the UK.
02:38Household bills have been adjusted downwards a little bit, but not enough to make any huge difference.
02:43But they are trying.
02:45So that's one.
02:45The other one, which actually is going to, if anything, perhaps lead to a bit of panic in the markets,
02:50is that there is a lot of talk about diesel in particular, where prices are rather high because of the
02:56refinery problems that we've seen both in the Gulf and also because of the war in Ukraine, where a number
03:04of refinery production facilities have been affected negatively by attacks.
03:10So they've stopped producing for a while and exporting.
03:14So what is being discussed right now is the possibility of rationing diesel.
03:18And of course, that is quite a concern for motorists if that were to happen.
03:24But of course, it would help up to a point the sectors that depend on it.
03:27What we've also seen is not only the government reducing taxes, but some of the companies saying we're not going
03:33to raise petrol prices in petrol stations across Europe.
03:38And they're doing that, particularly in places like Italy.
03:41So there are various things that are going on.
03:44But whether they're going to satisfy the markets and maybe inflation therefore will be under control, it's a big question
03:49mark.
03:50All right.
03:50Thank you so much.
03:51That's Vicky Price, an international economist.
