Quantatitive easing and savings - what effects?

Steve_xx

gozomark wrote: »

is it ? I don't think it will be

It will be bad news for savers in the short term, but if it causes inflation, then interest rates will have to be ramped up and that of course will be good news for savers.

I think I heard Eddie George say that they had reached the end of the line on interest rates. I note that he also made a statement about interest rates returning to a more "normal" level. He obviously believes that rates as they are now, are artificially low.

gozomark

It will be bad news for savers in the short term - only if you look at interest rates in nominal terms

if it causes inflation, then interest rates will have to be ramped up and that of course will be good news for savers - nothing "of course" about it at all , it will be bad news if inflation goes up more than interest rates

inflation in itself is neither good nor bad for savers. All that matters is interest rates after adjusting for inflation. Headline interest rates on their own tell you nothing about how well savers are doing

sh856531

but if it causes inflation, then interest rates will have to be ramped up and that of course will be good news for savers.

Thats not really true though is it? If inflation and interest rates go up in unison as you suggest then the "real" return hasn't changed at all. Whether interest rates are high or low really doesn't matter. What does matter is the difference between interest rates and inflation.

A higher interest rate does not necessarily mean you are getting a better return if inflation has increased.

Best Regards

S

sh856531

gozomark wrote: »

It will be bad news for savers in the short term - only if you look at interest rates in nominal terms

if it causes inflation, then interest rates will have to be ramped up and that of course will be good news for savers - nothing "of course" about it at all , it will be bad news if inflation goes up more than interest rates

inflation in itself is neither good nor bad for savers. All that matters is interest rates after adjusting for inflation. Headline interest rates on their own tell you nothing about how well savers are doing

SNAP!

:-)

Steve_xx

sh856531 wrote: »

Thats not really true though is it? If inflation and interest rates go up in unison as you suggest then the "real" return hasn't changed at all. Whether interest rates are high or low really doesn't matter. What does matter is the difference between interest rates and inflation.

A higher interest rate does not necessarily mean you are getting a better return if inflation has increased.

Best Regards

S

Yes I see what you say. Savers generally like to hold onto their capital whilst spending their interest. If rates are low and returns are commensurately low, the feeling is that one starts to eat into ones capital base and thereby reducing the potential to earn interest.

gozomark

that maybe the feeling, but its nonsensical - capital preservation should include allowing for inflation