Given the total political and economic mess in the UK and indeed internationally it is difficult to know where to start! Perhaps the best prospect of remaining reasonably objective is to begin with the UK monetary policy maker’s analysis and dilemma.

On Thursday the Bank of England’s Monetary Policy Committee published its quarterly Inflation Report, always something to note with care. However, this time around there is a Brexit-related snag, making this document somewhat less valuable than is usually the case. The Committee determined – or perhaps was required - to base its economic analysis, and hence its forecasts for the economy and the exchange rate and its insights into the interest rate outlook, on the assumption that Brexit will take place on schedule but with an agreement between the UK and the EU.

In the minutes of the Monetary Policy Committee meeting, rather than in the Inflation Report per se, the Committee acknowledges that: "In the event of a no-deal Brexit, the sterling exchange rate would probably fall, CPI inflation rise and GDP growth slow". This is relative to the forecasts for GDP growth et al in their report, which are on the alternative basis of a managed exit. ‘No deal’ exit may or may not be the new Government’s expected – or indeed preferred – outcome, but the financial markets are moving increasingly to an expectation of ‘no deal’ These market views matter, as they are very influential in setting the future projected paths for interest rates across the yield curve and for sterling against dollar, euro, etc. Hence the recent sterling collapse.

This mismatch between market expectations and the assumption for MPC forecasts complicates consideration of the likely future path for interest rates. If there is a managed exit, then economic growth may marginally outperform present expectations, sterling should recover some lost ground and the MPC may well consider a small hike in rates around the turn of the year.

In the event of ‘no deal’ the MPC statement above is crystal clear. The forecast GDP growth rate for 2019 and 2020 is already weak in the Inflation Report. Even with a managed exit they see a 30% probability of recession in Q1 2020. With ‘no deal’ the risk of recession would loom larger, and even with a heightened inflation risk the MPC would almost certainly take interest rates back down to a historic low.

But with rates at 0.75% the Bank’s scope for action is limited. In the event of a recession this limited loosening of monetary policy should be accompanied by well managed and significant fiscal loosening. Our new Prime Minister has indicated an intention to loosen the fiscal shackles. But by the time he has handed out a few £ billion to help prepare for ‘no deal’ and developed his handouts for the affluent and business there may be little left to oil the overall economic motor.

At this crucial time we need a strong, highly professional and wholly objective Governor of the Bank of England. We have one for now, but he is due to stand down next year and this is an early warning that a political appointee without strength, professionalism or objectivity could spell even more disaster. We also need a Chancellor, and indeed Shadow Chancellor, of the same ilk. The jury is out on this one. Further, the Bank and the Office for Budget Responsibility should prepare forecasts as a matter of urgency based upon the scenario of ‘no deal’ as well as a managed exit.

Meanwhile, across the pond, the US Federal Reserve has dilemmas of its own – both on where to take policy and how to cope with attempts at political interference. At its meeting last Wednesday the Fed cut rates by ¼ of one per cent, reversing an inopportune upward shift at the back end of last year. This was less decisive than President Trump had sought in the run up to re-election year; and less also than the markets had anticipated, or at least hoped for. The President would dearly like to remove the incumbent Fed Chair and replace him with someone more susceptible to Presidential tweets and badgering.

Underlying this debate is the concern at the Fed, and with the markets, that trade wars could trigger further global deceleration and impose severe costs upon significant elements of the US economy. These disputes have not been solved as rapidly as President Trump had proclaimed was likely and their continuation, indeed last week’s escalation, could cause mounting risks across the global economy; including of course the UK and Scotland.

As stated at the outset, what a mess! We need steady hands at Fed and Bank. We also need careful thought about fiscal policy in the UK and trade policy in the USA. Most of all we need to minimise uncertainties on both sides of the Atlantic. Even with big tax cuts business in the UK will not start investing or innovating or seeking to boost productivity while such stark uncertainties – and lack of trust in politicians – remain. Sterling’s further depreciation may theoretically enhance the competitiveness of our products. But that is of precious little value if business has no idea about the future for markets at home, in Europe, in the US or further afield.

Jeremy Peat is visiting professor at the University of Strathclyde.