Central bank cuts rates and considers quantative easing
March 20, 2009
Following the March Monetary Policy Committee meeting the Bank of England has cut the UK base interest rate once again, slashing it by a further 0.5 percent and taking it to a fresh all time low of just 0.5%. This is the sixth month in a row that the base rate has fallen, and following a series of aggressive rate cuts the base rate has dropped from 5 percent in October to just 0.5 percent in March.
Whilst many borrowers, homeowners, and businesses may be pleased about the latest rate cut, as it could mean lower repayments on loans and mortgages, there are also many that are upset by the rate cuts.
This includes savers, who are receiving punishingly low returns on their savings, pensioners who have been relying on their savings interest to live off, and building societies with officials worried that the lack of deposit from savers, resulting from low returns, will mean that access to funding will be further reduced.
The government is also considering quantative easing in order to try and boost the economy, and this is where the government purchases assets such as corporate bonds and government securities. The plan is to try and get a further £75 billion into circulation to boost lending amongst banks, although the Chancellors of the Exchequer, Alistair Darling, has apparently given the go-ahead for £150 billion to be ploughed in to the system if necessary.
One economist said that quantative easing “should in principle encourage the banks to lend to private sector agents such as households and businesses, stocking monetary growth and stimulating activity”.
Speaking of the rate cut, the Council of Mortgage Lenders stated: “This latest cut presents immense challenges for lenders whose margins are already squeezed as a result of previous reductions, leaving little scope to lower discretionary mortgage rates further. Savings are the lifeblood of mortgage lending, and unless lenders can offer competitive rates to savers their ability to offer new mortgages is restricted.”
- Monetary Policy Committee keeps rates on hold The base interest rate in the UK is to stay on hold for the first time in seven months, with the Bank of England announcing that it is leaving the rate on hold at 0.5
- Will interest rates drop to 0%? Since October of last year the UK has seen the base interest rate plummet, and it has fallen from 5 percent in October to just 1 percent following the February Monetary Policy Committee meeting, following
- No change in interest rates for June Following the Monetary Policy Committee meeting, which was held earlier this week, the Bank of England has announced that the UK base rate is to be kept on hold for yet another month. This is
- No change in interest rates for January There has been no further change in interest rates for the month of January. An announcement was made by the Bank of England following the Monetary Policy Committee meeting for January, where it was confirmed
- Interest rates being kept static for fourth month This month has seen the Bank of England announce that for the fourth month in a row the base interest rate is being kept on hold, at its all time low level of 0.5 percent.
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