Interest Rates down 1% Tomorrow?

freddysmith

If you are going to fixed your saving rate, today might be a good day before the banks/BS react to it.

StevieJ

cogito wrote: »

I can't see what a reduction in interest rates would acheive in the current climate (although I would welcome it as someone with a lifetime tracker mortgage). The banks still won't lend to each other and I doubt that savers would suffer as banks will still need to borrow from us and will be competing for our money. They wouldn't be likely to reduce rates at which they lend to business.

Maybe someone would explain it to me.

Have you not heard that that the Govt are taking a stake in banks, do you not think they will have an influence within those banks. Also I think savers are looking for safety now not interest rates.

cwcw

BREAKING NEWS - INTEREST RATES DOWN 0.5% TODAY.


http://news.bbc.co.uk/1/hi/business/7658958.stm

Sledgehead

StevieJ wrote: »

You are taking the Pxxx right?

It depends which way you define inflation.

Take RPI. The current bailout of bank employees / borrowers, some £50bn in capital injection and some £200bn in extra liquidity, plus, as I understand it, an extra £250bn on top, amounts tp £500bn of extra money, AND extra borrowing. That borrowing represents an extra debt per household of about 19k PER HOUSHOLD.

Household debt already stood at 1.4Tr, so this extra debt represents a monumental burden on the tax payer. You might start to wonder when this debt will be repaid. If you are a lender to the UK, you might start to wonder whether it is becoming the next Iceland. You might decide to withdraw your support.

The likely upshot is a flight from sterling denominated assets. That will hammer the pound. That will push up the price of imported goods. And that will keep RPI high (are you suggesting it is not already?)

The one thing that might defend sterling is base rates. Much as people put their savings in Icesave, investors will be willing to swallow risk if the returns in sterling are good enough.

Events have however just overtaken my ramblings. Rates have been cut by 0.5%. Don't expect cheaper shopping any time soon.

Banderman

So much for the independence of the BOE. What a farce

Money_Watch

Cut by 0.5% today (a day early!) more here: http://forums.moneysavingexpert.com/showthread.html?t=1206635

StevieJ

Sledgehead wrote: »

It depends which way you define inflation.

Take RPI. The current bailout of bank employees / borrowers, some £50bn in capital injection and some £200bn in extra liquidity, plus, as I understand it, an extra £250bn on top, amounts tp £500bn of extra money, AND extra borrowing. That borrowing represents an extra debt per household of about 19k PER HOUSHOLD.

Household debt already stood at 1.4Tr, so this extra debt represents a monumental burden on the tax payer. You might start to wonder when this debt will be repaid. If you are a lender to the UK, you might start to wonder whether it is becoming the next Iceland. You might decide to withdraw your support.

The likely upshot is a flight from sterling denominated assets. That will hammer the pound. That will push up the price of imported goods. And that will keep RPI high (are you suggesting it is not already?)

The one thing that might defend sterling is base rates. Much as people put their savings in Icesave, investors will be willing to swallow risk if the returns in sterling are good enough.

Events have however just overtaken my ramblings. Rates have been cut by 0.5%. Don't expect cheaper shopping any time soon.

Just out of interest where are they going to fly to when everyone is in the same position

Milarky

StevieJ wrote: »

Just out of interest where are they going to fly to when everyone is in the same position

Maybe belonging to the the Euro and having no separate ('independent') currency to speculate against? The Pound/Euro have both dropped against the Dollar recently. When the Dollar reverses it could take the Pound with it... Co-ordinated cuts are ment to guard against this, of course..