Thursday, June 5, 2008

Rates on hold

Interest rates kept on hold at 5%

UK interest rates have been left unchanged at 5% following the latest meeting of the Bank of England's Monetary Policy Committee (MPC). The decision to hold rates had been widely expected amid concerns about the pace of inflation. Rising food and fuel prices pushed inflation to 3% in April, well above the government target of 2%. However, a slowing economy and falling house prices had led some to call for a cut in rates to boost spending.

Posted by jack c @ 12:02 PM (1628 views)
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12 thoughts on “Rates on hold

  • The housing industry pundits will – inevitably – express disappointment, and provide ‘warnings’ that the housing market will suffer (house prices will drop further).

    They didn’t take long to decide though …

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  • Absolutely Paul – witness the “Housebuilders Federation” calling for an immediate half-point rate cut to avert a major market slowdown. The pressure to deliver a cut next month will be immense.

    To be honest though I don’t think it matters – the crash has built up critical momentum already IMO. Look at the effect the rabid rate-slashing Federal Reserve had in the US – bog all basically.

    The credit’s gone, the confidence has gone.

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  • george monsoon says:

    Base rate remains unchanged, but the Banks aren’t listening any more…

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  • I agree, it’s been quite clear that the US knee jerk reaction has not created a recovery.

    It woulod be pointless to do the same here at this stage.

    Far better to wait a 12-18months and reduce interest rates when inflation is back under control.

    Given our interest rates are 5% and Eurozone 4% was the GBP overvalued previously or undervalued now?

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  • The Council of Mortgage Lenders says that today’s decision came as no great surprise. Michael Coogan, director general of the CML, says: “We expected the MPC to hold rates today as it wrestles to control rising inflation in a weaker economic outlook. “But clearly there are still affordability pressures on borrowers and a widespread funding shortage for lenders. “We hope that as the effects of the BoE’s liquidity scheme feed through the financial system there will be some benefits for mortgage lenders, and in turn borrowers, later in the year.”

    Tim Fletcher, sales and marketing director of Baseline Capital, says that with commodity prices rising the BoE has little freedom of action.
    He adds: “The BoE is stuck between rock and a hard place. They have one objective – mitigating inflation. This isn’t the US where the central bank has to balance inflationary control with economic stability and growth. “While commodity prices are putting pressure on inflation, our MPC has little freedom of action. And at any rate, loosening monetary policy today would have had little effect on lenders’ retail rates.”

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  • It’s “steady as she goes” from the BoE. What’s interesting of course is the fact that if the markets (FTSE) go into meltdown, which IMHO is on the cards, the government will step in, take control from the ‘independent’ BoE and lower rates. The “Exceptional Circumstances” speech on the steps of the Treasury will be trotted out. Heard it before?

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  • Forget the BoE and FED IRs. If a big US monoline goes under, the whole fookin lot implodes & we’ll have financial armageddon.

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  • Sack the BOE and the Government, hand everything over to Disney, i bet micky and mini mouse would do a better job

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  • need-a-crash says:

    This is cause for celebration isn’t it?

    HP down 2.4% in a month and now the BoE is standing up to inflation, what more could we ask for… long may it continue 🙂

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  • shipbuilder says:

    The mainstream press are talking about stagflation now and the anecdotal evidence is starting to come in – the same person told me that food prices were ‘ridiculous – the public don’t know the half of it’ and that shops recently in town were absolutely dead.

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  • Looking at my personal inflation figure, they should have put rates up by 1%.

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  • renting2, are you referring to your waistline?

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