My posts are getting fewer and further between on these nice summer days. Sadly the problems in the financial markets show no sign of abating. Although short term money seems to have stabalised and the banks are slowly getting through the initial problems of the credit crunch, market instability remains.

It is quite amazing to see oil prices shoot up by $10 in one day, all on the back of a statement by the ECB that it might have to raise interest rates. Longer-term borrowing rates have also been rising rapidly over the past month following the release of the Bank of England's inflation report, which has highlighted that inflation will remain well above target for some time.

In the next few months the slowdown in the economy will become increasingly apparent. Unemployment, as measured by the claimant count, actually rose in the first quarter, despite what the intial stats were telling us. This will continue to rise over the next two quarters, at least. Higher oil, food and mortgage costs will prevent households from spending, harming the retail industry. Business in general will be hit by higher borrowing costs and the slowdown in the general economy.

All in all things are looking fairly bleak for most of 2008. Until market fundamental return things will not get back to normal. Currently those working in the financial markets don't really know what's going on and therefore react aggresively to every new piece of data. Trichet at the ECB must have known this before his announcement last week - it seems strange that he would have mentioned his worries about the impact of higher inflation (significantly caused by high oil prices) and therefore pushing oil up even further in the process. I believe he should have waited and allowed a period of calm in the oil market, allowing for some sort of normality to return.

Finally I suggest that perhap it is time for the trading floors to calm down for the summer months and enjoy these nice hazy days. Perhaps taking a couple of months off to come back refreshed, rested and with hopefully a greater sense of calm and reality. Sadly this isn't likely, the only people in the City who are going to be enjoying the sun this summer are those that lose their jobs...there may well be quite a few of these people!

The Bank of England cut interest rates today to 5%. It has been said by many of my colleagues that this won't make any difference to the economy. This is clearly not the case and I think they are thinking more about their own economies rather than the rest of the UK.

It is fair to say that most of my colleagues won't see an instant impact upon their mortgage rates. Tracker mortgages will see a benefit but given the rapid decline of mortgages repayment costs for those looking to remortgage will probably remain high for some time. Nevertheless, they would be higher had the Bank not cut today.

For the wider economy this move should help to take some of the strain off the financial markets. Don't get me wrong, the problems in the financial markets can not be overcome by the Bank making a few interest rate cuts and the problems in the markets are likely to continue for some time. Nevertheless, this cut provides some breathing room which will give the financial some more time to sort out the mess they are in. Fundamentally, the problems in the financial markets is one of a lack of confidence, if the markets can maintain some sort of stability for a few straight months then maybe we will see of confidence return.

We continue to be in for a very rough ride with the problems in the financial markets compounding the growing problems in the wider economy.

The outlook for the jobs market is not great. First to go will be jobs in the financial sector - we have seen Capital One and the Royal Bank of Scotland announce job cuts this week. Next will follow job cuts in industries that support the financial sector such as business services and retail surrounding financial hubs like the City of London and finally cuts should be expected in the wider economy.

Although unemployment fell in January and February, the statistics will show this reversing very soon.

Be prepared for painful 2008 and a pretty average 2009.