By Robert Harris
FARMERS leaders highlighted the damage that the strong £ is doing to agriculture at a Bank of England meeting this week.
NFU president Ben Gill, who was accompanied by Scottish NFU vice president Peter Stewart, met the Governor of the Bank, Eddie George, for an hour.
Their message was that the strength of Sterling, coupled with high interest rates, was causing lasting damage to the farming sector and those who depended on it.
“We presented a very clear picture of the extent of the problems arising from the current farming crisis,” said Mr Gill.
“Our discussion also drew attention to the domino effect this hardship is causing to those allied industries that provide services and jobs in the rural community, all of which were acknowledged by Mr George.”
Although apparently very sympathetic, there is little Mr George can do to ease farmings plight, given the narrow remit of the Banks monetary policy committee, which is to control inflation.
Reports suggest the government might be trying to change tack to ease exchange rates in preparation for economic and monetary union, but Mr George said he had received no such indication from the Chancellor, Gordon Brown.
Nevertheless, says NFU chief economist Sîon Roberts, Mr George did state that the Bank of Englands two-year forecast on growth and inflation assumed the Pound would weaken.
“If it does not, he said that it was likely that inflation would undershoot the target, and depending on other developments in the economy, there might be a need for a further easing of interest rates.”
Signs that the Pound may not be tracking the Dollar so closely also give grounds for optimism, suggesting that lower interest rates were having some effect in halting Sterlings rise.
“Growth rates in the US are very strong, and the strong Dollar has dragged the Pound up.
“Given that we are at almost zero growth, we should be more closely aligned with the Euro – core countries in the EU are currently weak,” says Mr Roberts. “It would help if they got stronger.”