Wednesday, October 8, 2008

The MPC said that cuts in interest rates alone “could not be expected to resolve the current problem

Central banks cut interest rates to buoy global economy

The Bank of England joined other world central banks today in a coordinated cut in interest rates designed to ward off the threat of global recession. The Bank, the US Federal Reserve and the European Central Bank all lopped half a point off their key interest rates in the first unscheduled rate moves since the aftermath of 9/11. Sweden, Canada and Switzerland made similar cuts. Australia reduced rates by a whole percentage point earlier this week.

Posted by malct @ 06:51 PM (895 views)
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10 thoughts on “The MPC said that cuts in interest rates alone “could not be expected to resolve the current problem

  • Whostolemyendowment says:

    ‘Strange’ that they can’t agree on a common stratergy on banking guarantees, but can coordinate rate cuts!

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  • Why risk your savings in a vulnerable bank if you’re getting these rates? Government guarantees won’t cover a worst-case scenario.

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  • Well, this must have seemed like a very small step for Gordon. Obviously, the MPC has never really been independent, and now we have had it demonstrated that they are not.

    After all fairweather financial management or crybaby capitalism is not capitalism at all.

    The problem is that paper money has been used too much like a magical piggy bank for government to kick problems down the road, and printing more of it will not restore faith in it.

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  • Miles Templeman, director-general of the IoD said: “We welcome the coordinated monetary and fiscal response to the current crisis. However, we strongly believe that a further interest rate reduction of 50 basis points will be required next month, if not before.

    “Inflation was yesterday’s story, recession is today’s story and deflation is tomorrow’s risk. Interest rates are heading in one direction – down.”

    The central banks made a joint statment saying: “Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability.

    “The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.”

    did I say pantomime?

    “he’s behind you !”

    oh no he isn’t

    oh yes he is

    loop till your knackered

    information war – wear the bar stewards out so they can’t think straight

    oh no we can’t

    oh yes we can

    repeat until they are knackered

    sorry friends and foes, even in despair creativity and truth will find a way to punish the wrong doers

    oh no it . . . oh shut up!

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  • If the problem is debt, how can rate cuts be a solution? This move is not stupid, it’s criminal.

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  • what an historic day it’s been.
    What is going to happen now, with this bailout and then the cut in IR does anyone have any idea?

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  • Every commentator is united in that they don’t know, or can’t even guess, what the repercussions will be. Which means that now the banks have lost all our money gambling, the governments are giving them a whole load more to gamble with. What a load of a**e!

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  • mark wadsworth says:

    @ Soldout, nothing will happen.

    Cutting central bank base rates is ‘pushing a piece of string’ – commercial banks will lend at the market rate. The fact that the commercial banks can borrow more cheaply is neither here nor there.

    To take a silly example, if you own a stall selling apples, and the market price for apples is 20p, it doesn’t matter whether you buy them from the wholesaler for 15p, from a local farmer for 10p or you pluck them from your own back garden for free.

    If you read the articles in the papers, there are conditions attached to this taxpayer funded bail out – one of them being that banks ‘continue to lend to mortgage borrowers’, sub-text, ‘at artificially low rates’, sub-text ‘ to try and prop up property prices’ sub-text ‘to maintain the illusion of wealth’ etc etc.

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  • Mark Wadsworth in reply to sold out said:
    @ Soldout, nothing will happen.

    Those people with mortgages tracking the base rate will benefit but overall the rate lenders lend at has become completely detached from the BoE base rate and a movement in one has little impact on the other.

    No doubt the Express will be hailing the base rate cut on tomorrow’s front page.

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  • autopilotengage says:

    Anyone noticed how Darling appears to have caught Brown’s “hough”? Fascinating phenomenon. What ever became of Gordon’s “golden rule”? Funny how that isn’t contagious.

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