Interest Rate Predictions Thursday February 5th 2009
Today is the bank base rate announcement, which means for many there could be even lower interest rates. With the bank base rate already at an all time low of 1.5%, many out there believe it will be reduced further.
I read on interesting article about Bank of England interest rates predictions that predicts that the base rate will come down a further 0.5% today, bringing it down to 1%. This would see the cost of borrowing £100,000 fall to £1,000 a year or £83.34 a month, quite amazing.
According to an article in The Times there seems to be a split amongst the members of the Monetary Policy Committee, some in favour of a big cut today, even talk of bringing the base rate to zero, whilst others believe that the rate of interest is not the problem anymore, and the bank should instead look at other ways of improving the situation.
The other measures being discussed were quantitative measures, whereby the Bank of England would buy up illiquid assets from the commercial banks, thus making them more liquid and injecting cash into the system. There seems to be a lot of support for this quantitative easing, some of the MPC members believing it to be of more use to the wider economy than interest rate reductions.
It does beg the question, if the Bank of England buys up assets from the banks and therefore injects cash into the system, what does the Bank of England get out of it? Or is this another example of the government being taken for a ride by the idiots that run the banks in this country?
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