Thursday, August 7, 2008

BOE base rate held by MPC @ 5%

Bank holds UK interest rate at 5%

The Bank of England has kept interest rates on hold at 5% as it struggles to deal with a slowing economy and spiralling inflation. Many reports have shown the economy heading for a significant slowdown or even a recession. But the Monetary Policy Committee's primary goal is to keep inflation at 2% and it currently stands at 3.8%. Although the bulk of members voted to hold rates last month, one supported a cut, while another backed an increase.

Posted by jack c @ 12:01 PM (2109 views)
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20 thoughts on “BOE base rate held by MPC @ 5%

  • is this what they call fighting inflation? fools

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  • Very quick Jack!!! One supported a cut? hmmmm now who could that be?

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  • Our first remit is to keep inflation under control…………………….yeah right, goodbye sterling.

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  • @ techieman – Danny boy always votes for a cut, no doubt he will have gone for 50 basis point cut this month.

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  • Eternal Sceptic says:

    Please complete the following sentence: Nero fiddled while Rome burned, the British economy tanked while ,,,,,,,,,,,,,?

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  • It goes without saying that inflation will now top 5% by the end of the year. It appears that the BOE have no input in the fight on inflation.

    This is a really dodgy decision.

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  • In response from http://www.mortgagestrategy.co.uk/cgi-bin/item.cgi?id=170842&d=403&h=401&f=402

    Jonathan Cornell, managing director at Hamptons International Mortgages, says: “Another month and further stalling tactics from the MPC. Inflation crept ever higher in July, reaching 3.8% and carrying warnings of inflation nearing closer to 5% by the year end, yet the MPC still remains undecided on the path it should take. “Holding the base rate, while offering relief from a rate increase, will do little to ease borrowers’ pain. The average monthly mortgage repayment has been gradually increasing and with increases in energy and food costs in July, borrowers will have to stretch themselves even further this month.”Cornell adds: “There seems to be no happy outcome at the present time. However, it will be those that keep their finances in check and seek savings, who will be in the best position to ride out any further rises to rates or inflation; depending upon the MPC’s eventual leaning.

    “Richard Lambert, director-general of the Confederation of British Industry , says: “The latest data show the slowdown in UK economic activity gathering pace, and business and consumer confidence falling further. “However, with inflation heading higher in the next couple of months, the BoE is right to leave rates on hold for the time being.”

    Ross Bowen, managing director of Connells Survey & Valuation, says: “While a lower base rate would take some of the pressure off lenders, allowing them to lower their rates more, it’s not a surprise that the MPC decided to hold today. “It’s far more important that the Bank of England and government work towards improving market liquidity, allowing more lenders to drop the rates they’re offering.”
    Bowen adds: “As banks begin to repair their battered balance sheets, we are seeing a little confidence return to the market – interbank lending rates have dropped from their high. “Abbey’s move yesterday to pass on rate cuts to borrowers is a flicker of hope for those trying to get a foot on the property ladder. It’s great to see lenders make the effort to pass on cost savings to their customers.”

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  • waitingfor hpc says:

    hey guys – they will always react late. No doubt when inflation does go to 5% in the CPI – they will act. Beacuse by then the unions will be banging down the doors for big pay rises.
    This is buying people more time before mortages rates go even higher.

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  • Its true LIBOR has dropped from its high BUT it just looks to me like a retracement in a bear market with another push up due, starting soon, as Short sterling edges towards its 100 DMA.

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  • “When in doubt, do nowt”

    Can’t really fault the MPC’s decision. If only the government followed the same rule.

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  • Is it just me, or does anyone else think that IRs are almost irrelevant with respect to the current HPC situation?

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  • @ techieman – “Its true LIBOR has dropped from its high BUT it just looks to me like a retracement in a bear market with another push up due, starting soon, as Short sterling edges towards its 100 DMA” – agree fully with your analysis on this one, for those coming off a fixed rate mtg I would avoid trackers which will look favourable very short term and go for another fixed rate as borrowing longer term (IMO) will become more expensive.

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  • @ 9. harold said…
    Is it just me, or does anyone else think that IRs are almost irrelevant with respect to the current HPC situation?

    Still relevant as they impinge upon affordability for those with mortgages and those trying to get on the property snake, but not perhaps carrying the same importance weighting as before.

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  • [email protected]

    …I would agree with all of your statement. The BoE drop rates to aid interest rates for borrowers. the banks are too scared to lend to each other so the interbank rate rises, interest for borrowers rises (albeit with pathetic drops thrown to the heaving masses, by the oh so generous b(W)ankers), but the real move caused by the BoE fiddling with rates is that savers get penalised on all sides: savings worth less due to rising inflation, and the rates of interest have plummeted (Barclays e-saver dropped from 5.5% to 3.9% even though the BoE has only dropped their rate by 75basis points). Another example of UKPLC’s miracle economy forcing people to spend rather than save, this creates a strong economy, APPARENTLY.

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  • @ harold

    It’s not just you. I don’t care if someone came to me with a 2% mortgage for a new house. It’s like going to a car dealer and getting 0% finance on a car waaaaay over the asking price.

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  • Growler – couldn’t agree more!

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  • eyeoftheweasel says:

    I suspect the BoE’s real remit is to make the public at large believe that their remit is to control inflation, while in reality doing nothing whatsoever about it.

    I hate the way that the BBC are constantly insinuating that there must be another rate cut to look forward to in the not too distant future. It’s like Oxford Street putting up the Christmas lights in October. Not everyone looks forward to Christmas, and to be quite blunt a rate cut isn’t the good news for all that the BBC suggest it is.

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  • Hmmm. Lots of hawkish comments. But while inflation is still nudging up, we can’t ignore the fall in oil prices, increasing unemployment and falling resource utilization. Money markets are now pointing to rates easing having been predicting tightening in July. Inflation is likely to peak in Q4/Q1 ’09 and then fall so the BoE is unlikely to increase rates unless we see another spike in oils.

    However, I agree with Harold, interest rate falls probably won’t affect house prices right now. The bubble has burst and sentiment will drive the market down. Would people want to buy knowing we are going into a recession?

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  • mark wadsworth says:

    Is it just me, or do the MPC now delay their decisions until just after the Halifax report has come out?

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  • mark wadsworth says:

    Harold, I agree. What is causing big fall in prices is lenders going back to sensible deposits and earnings multiples. A 25% deposit and three-point-five times earnings mortgage brings prices down by about half, whether that at 5% or at 7% interest is neither here nor.

    But as a saver (i.e. a sell-to-renter) I’d like to see much higher interest rates and/or low inflation, thank you very much.

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