Thread: UK Bank Rate

For those of you that have savings in the UK, another rate cut

BOE Cuts Rate to Lowest Since Bank’s Creation in 1694 (Update2)

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By Svenja O’Donnell


Jan. 8 (Bloomberg) -- The Bank of England cut the benchmark interest rate to the lowest since the central bank was founded in 1694 as policy makers tried to prevent the credit squeeze from deepening Britain’s recession.
The Monetary Policy Committee, led by Governor Mervyn King, trimmed the bank rate by a half point to 1.5 percent. The result matched the median forecast of 60 economists in a Bloomberg News survey. The pound rose against the euro and the dollar.
“The availability of credit to both households and businesses has tightened further, pointing to the need for further measures to increase the flow of lending to the non- financial sector,” the Bank of England said in a statement. “Output is likely to continue to fall sharply during the first part of this year.”
The reduction limits the central bank’s scope to keep fighting the recession with its main policy tool. That may spur King to cooperate with Prime Minister Gordon Brown to inject money into the economy and the financial system through so- called quantitative easing.
“They’ll come down below 1 percent by the second quarter,” said Philip Shaw, chief economist at Investec Securities in London. “Things have deteriorated further and this highlights the need for further monetary stimulus. Quantitative easing or non-conventional monetary policy techniques are on the cards.”
Pound Rises
The pound rose as the Bank of England’s move dashed some investors’ expectations of a larger cut. The currency climbed as much as 1.3 percent against the euro after the decision and traded at 89.06 pence per euro as of 12:30 p.m. in London. Against the dollar, it increased 1.2 percent and traded at $1.5241.
The central bank reduced the interest rate by 1.5 percentage points in November and by 1 percentage point in December.
The Bank of England may soon have to join the U.S. Federal Reserve and the Bank of Japan in expanding its toolkit to fight the financial crisis.
U.S. officials, led by Fed Chairman Ben S. Bernanke, lowered their main interest rate close to zero in December and on Jan. 5 started buying mortgage-backed securities. Rates in Japan are also close to zero and the central bank has increased its emphasis on adding funds to the financial system.

The Bank of England may soon have to join the U.S. Federal Reserve and the Bank of Japan in expanding its toolkit to fight the financial crisis.

I suspect that this is code for printing money, a similar ploy being tried by Zimbabwe.

How can the (BOE/Govt) expect working people to go out and "Spend-spend-spend" when so many jobs are on the line. If you've got one, then you are going to watch the pennies, arent you?

Originally Posted by BarnacleBill

How can the (BOE/Govt) expect working people to go out and "Spend-spend-spend" when so many jobs are on the line.

because they are lacking a firm link with the old reality - they learnt the new reality at MBA school