LONDON, Nov 1 (Reuters) - Veteran hedge fund manager Crispin Odey believes Britain is “destined” to have a recession, he said in a letter to investors seen by Reuters.
London-based Odey said the Bank of England had engineered an unsustainable situation in which company earnings have fallen but the stock market continues to rise.
Bank of England governor Mark Carney should be raising interest rates to counter the growing difference between inflation next year and today’s interest rates, he said.
“What the UK is promising is rising wages, recession, inflation and falling profits,” wrote Odey. “Not exactly the prize that ticket holders in the FTSE and the gilt market have paid up for.”
Odey had previously told Reuters Britain’s vote in June to leave the European Union would allow it to navigate a slowing global economy better.
In his letter he said: “On the back of the uncertainty for overseas investors in UK PLC following on from the Brexit result, the current account deficit is ballooning and the budget deficit is following.”
“As sterling falls against all its trading partners’ currencies, it is mechanically ensuring that inflation rises up through 3.5 percent.”
Britain’s annual consumer price inflation rose to 1.0 percent in September from 0.6 percent in August. The Bank of England cut interest rates in August for the first time since 2009 to help cushion the economy after the Brexit vote.
Britain’s blue chip FTSE 100 share index hit a record high last month. Since Britons voted on June 23 to leave the EU, the pound has dropped almost 20 percent against the dollar.
Odey’s 332 million pound ($405.90 million) Opus Fund made gains of 1.1 percent in September, the letter showed, and held 28 percent of its assets in cash. ($1 = 0.8179 pounds) (Reporting by Lawrence Delevingne and Maiya Keidan. Editing by Jane Merriman)