Great news / terrible news.

The interest rates being paid in the market will remain a long way above the base rate IMO due to the Government borrowing such vast amounts of money.

Deflation is definitely a big risk and as such the BoE should be cutting rates.

"It is critical to get rates lower - if the medicine is not working you have to use a stronger dose," he said. "[The Bank] needs to get rates down far and fast.
"They need to be pretty bold. The lowest rates have ever gone is two per cent. They could easily go lower than that now - why not? After all the Federal Reserve [in the US] dropped rates to one per cent."



But what do you do next, if that doesn't work? - you've jumped too quickly to the historically low rate, and have no manoeuvering room left...

Instead of being impatient, the whole global economy needs time to come to terms with the new reality we are facing...time to find a way to live/work without Growth being the mantra?

We need to get some of the growth expectations out of the minds of stock markets.

i.e. Before globalisation, there was always another market to tap, that could lead to growth for a company. Or another source of cheap labour, materials to reduce your costs, allow price reductions to boost your sales/profits.

Now, when even tiny outfits just starting out, such as seen on Dragon's Den, have been to China, visited 'their' factory, booked container loads etc, there is very little room for reducing costs, improving productivity, seeking fresh markets...

And yet the underlying expectation is that companies must post ever rising sales turnover and profit results, otherwise the markets will mark you down...

Growth was 3% around the start of 2008, should losing that 3% really be the cause of "historic" choices on interest rates?

Seems like we are trying to falsely maintain the unsustainable.

IveSeenTheLight wrote: »

What's the point of having manouvering room if you are not prepared to manouver into it? Maybe being cautious and delaying drops would simply pro-long the situation

One of the factors why people was wanting interest rates to go up was as a result of the inflation rate.
There is now wide regard that foods / oil etc are dropping and therefore inflation is dropping.

This therefore eases the pressure against dropping interest rates.

Whatever happens, I hope there is stability achieved as soon as possible for everyones sake

Have you noticed the current Interest Rate in the US...?

http://www.tradingeconomics.com/Economics/Interest-Rate.aspx?Symbol=USD

At 2% for most of this year, it has not helped stimulate their economy, or restore confidence in their markets. (interesting the LIBOR has grown away from the Central Bank rate, so Banking confidence is little to do with IRs?)


If UK was to drop IR to around 2%;

1) would that make any difference when it already hasn't in the US?
2) what would the effect be on our currency/exports/Balance of Trade?
3) where do we go after 2% when it hasn't worked.

post 2% scenario- the markets could have a bad week, coz of a few economic indicators, and the BoE, already having gone down 0.5% 4 times in 4 months, or 1% twice in 2 months, does what...drops again.

Down another 0.5% to a 300-year record, and instead of working, it worsens the situation, as the markets realise "wow, they must know something we don't, get out now"...

= Bust, permanently.


I'm coming round to some views about media/constant doom & gloom/a little knowledge is a dangerous thing etc...

Everyone expects it to be fixed, done, sorted, almost overnight.

Once upon a time, you had to wait a quarter to see the effect an IR change had.

Now the 0.5% of last week is already being discounted as too little, and people are wanting a 50% cut in IRs...just because they aren't prepared to accept a bit of pain as being part of the learning process so that we don't go back up the road to a bubble for a generation.

Few people seemed to be campaigning for "stability" when the boom was getting out of control. Higher IRs around 2005, could have cooled things off...but that probably infringed someone's "human rights to indebt themselves upto the hilt without any comeback".

Maybe we need to hit bottom good and hard, for stability to be anything other than a short-lived blip on the way back up to another bubble.