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Which way for interest rates? |
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Savers hope for increases in interest rates whilst borrowers look anxiously for signs that they will go down. It has been a confusing time in recent months, with some pundits saying that rates had peaked and they would not go any higher whilst others claimed that they would still be high at the end of 2008. Currently the situation, as we all know, is that the rates have started to fall, but still the arguments continue. America's central bank (Federal Reserve) had obviously made up their minds that tough times lay ahead when on January 22nd they cut their interest rate by ¾ point to 3.5% - this was reported to be the biggest US rate cut in 26 years and was a sure sign of very deep concern over the state of the US economy. It was described by Becky Barrow (Daily Mail Business Correspondent) as a desperate bid to calm the global stock market melt down, and implied that a recession was looming. The reaction of the Bank of England indicated that an emergency cut was not being considered and that there were no plans in hand to bring the decision forward from early February. The UK government reacted to the news with a comment from Ed Balls that the economy is strong and inflation low, but this was not accepted by Mervyn King who is concerned that the known increases in food and fuel costs which are now coming 'on-stream' will fuel inflation, which would be exacerbated by a rate cut now. However, he also hinted that he believes that UK interest rates could usefully be reduced, although there was little prospect of him matching the size of the US rate cut. We know that Thursday 7th February will provide the answer - with a ¼ point cut to 5.25% being forecasted. This will disappoint some commentators who are pressing for a ½ point cut. The British Chambers of Commerce for example took the bold move in pressing for a ½ point reduction on the basis that the needs of growth in the economy required such a move. On the other hand the CBI expressed hopes that the size of the cut will be kept small. Obviously once the decision to cut the rate has been agreed, the actual level of the cut is dictated by consideration of inflationary pressures versus the need for growth - this was described by Ian McCafferty as 'a delicate balance'. |
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January 2008 Pause in house price movement Banks battle out charges case in court The changing value of money Heating costs climb Sub-prime mortgage problems spreading Which way for interest rates? December 2007 Focus on house prices Direct debits in demand Political attitudes to marriage FSA arms to examine comparison sites Household costs increase Debt is now a way of life November 2007 PIN mania Loan companies reorganise Which way to the Rock benefits? Top financial tips for 2008 Investing in the future Treating customers fairly initiative October 2007 Bankers Association report on future protection Sub-prime mortgages effect continues FSA targets financial websites When a loan becomes necessary BBA worried about negative commentary on PPI Home owner's worries September 2007 Bank of England provides savers guarantee FSA continues assessment of PPI selling Self-employed options under review No consensus on UK house prices Debt review for Scotland released Loan plans subject to change August 2007 Dealing with debt is normal today The real cost of raising children Situation with bank charges unresolved Subprime mortgages to be reviewed Second homes set to outperform domestic market Buy-to-Let sector remains buoyant July 2007 Are credit cards encouraging debt? Interest rate increases good for savers Fixed rates making comeback at a cost TCF is good news for customers Borrowers making choices based on reputation Spotlight now on home insurance June 2007 Has the interest base rate reached its ceiling? High street retailers drop the cheque First Direct fee has desired effect Yorkshire Bank pushes penalty fee cases into small claims court Mortgages take bigger slice of income Popular reasons for a loan May 2007 More families rely on two incomes Judgement on overdraft charges Personal insolvency rates slowing down Challenge to home information packs Further interest rate rises expected by consumers April 2007 Annual inflation rate continues to rise House price index shows slight fall Homeownership prospects for public sector workers Current accounts in the UK Mortgage equity borrowing Chip and pin security initiative March 2007 Inflation rate rises again Green mortgages all the rage Car loans can help you buy a better car Debt consolidation loans popular Mortgage companies give way to FSA pressure Significant changes in UK home buying The cost of moving house |
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