The Bank of England’s Monetary Policy Committee (MPC) decided to keep interest rates on hold today at 5.25%. A decision which is in line with market expectation and predictions. It made no statement to accompany its decision but policymakers had been suggesting the bank had to balance the demands of slowing growth and rising inflation. Soaring oil prices and the rising cost of food is putting a huge pressure on inflation around the world. The policymakers are concerned that inflation could rise to around 3% in the coming months which will require the central bank Governor, Mervyn King to write an explanatory letter to the government. However, economists are predicting further interest rate cuts in the coming months.
Posts Tagged ‘Bank of England’
Bank keep rates on hold at 5.25%
Thursday, March 6th, 2008Bank cuts interest rates to 5.25%
Saturday, February 9th, 2008The Bank of England cut interest rates on Thursday by a quarter point to 5.25 percent despite calls for a half-point cut. The widely expected quarter point cut by the Central Bank was modest compared to the recent cuts made by the US Federal Reserve (1.25% points last month alone). The Bank’s move will be welcomed by many mortgage borrowers, but homeowners who do not have a mortgage deal directly linked to the base rate may be disappointed as some lenders have been increasing their own rates in anticipation of a cut. The decision by the Bank of England’s Monetary Policy Committee comes as more evidence emerges of a slowdown in economic growth both in the UK and overseas.
£25bn sweetener revealed for Northern Rock
Monday, January 21st, 2008Today’s detailed plans to rescue Northern Rock involves converting the £25bn of Bank of England loans into bonds that would be sold off to investors. The bonds would be available for up to five years after which any remaining debt would be written-off. Critics point out that the scale of the rescue package is highly risky. In the event of a catastrophic downturn in the housing market, with Northern Rock mortgage holders defaulting on their debts, the taxpayer would be left seriously out of pocket. With this new deal, potential purchasers of Northern Rock will no longer be responsible for paying back the loan and will have until February 4 to make a renewed bid to the government. In return for taxpayer support, the government will receive a percentage of the new owner’s profits. If the government was unable to secure a sale, then nationalisation would become necessary.
Base rate held at 5.5%
Saturday, January 12th, 2008
On Thursday, the bank kept rates on hold at 5.5% despite pressure to cut rates after increasing signs of a consumer spending slowdown. But most economists believe that this decision makes the need for a cut next month, all the more pressing. But the MPC is charged with keeping a lid on inflation which is currently running at 2.1% instead of it’s 2% target.
Many lenders failed to pass on rate cut
Wednesday, January 9th, 2008According to figures, eighteen of the 103 mortgage lenders failed to pass on any of last month’s interest rate cut, while sixteen reduced their rates by less than the full 0.25%. However, many banks and building societies have taken the opportunity of the interest rate cut to reduce their savings by more than the 0.25% reduction in base rates. A total of 117 providers have so far cut their savings rates, with just 15 leaving them unchanged. Alliance & Leicester has made the biggest reductions to its savings by slashing rates by up to 0.5%, while HSBC has reduced some accounts by up to 0.49%. Britain’s biggest mortgage lender Halifax and Bradford & Bingley have both cut rates paid to savers by up to 0.4%, while a number of banks and building societies, including Britannia, Royal Bank of Scotland and NatWest, Yorkshire Bank and Sainsbury’s have decreased them by 0.3%. Will another rate cut mean banks carry on cheating customers even more?
Rate cut or rate hunch?
Tuesday, January 8th, 2008The Bank of England will come under intense pressure to cut interest rates this week as figures out show that the high street suffered its worst Christmas for three years. Retailers endured another difficult day on the Stock Exchange amid mounting fears of possibly one of the toughest trading spells in recent memory. The gloom surrounding the economy may deepen if, as expected, Halifax reports that house prices fell again in December for the 4th consecutive month - making a case for a speedy rate cut. However, many economists believe that fears over inflation, fuelled by record petrol prices and rising gas bills, may force the Bank of England to wait until February or March before taking the next move down. The decision on interest rates will most definitely be a close call.
Central banks try to regain control
Friday, December 14th, 2007Five of the world’s leading central banks including the Bank of England plan to inject £54bn of cash loans into the money markets. They hope this would ease the interbank rates (the rate used by banks to lend each other money) which has remained stubbornly high despite the quarter rate cut last week. Although some analysts believe this will result in an immediate reduction in the interbank rates (and filtering through to mortgages/loans) others however, warn that it would take time for lender to trust each other again. Probably not while there are still huge bank losses still to be realised from the subprime crisis for some months to come. So will this gesture make a difference or has it come too late? We’ll have to wait and see.
