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COMMENT: Ideally, rates would have been reduced
8:41am Friday 5th September 2008
THERE has been something of a mixed reaction to the Bank of England’s decision to keep interest rates on hold for the fifth month in a row.
The Bank’s monetary policy committee voted to keep rates at five per cent yesterday, insisting it was the right move as it prioritised the fight against soaring inflation.
But with economic growth stalled between April and June, leaving the country teetering on the edge of a full-blown recession, we would argue that giving homeowners and borrowers some relief should have been the priority this time.
When we refer to borrowers we do not just mean individuals with personal loans. We mean small businesses with overdrafts and loans to pay off. These firms are employers and the harder it is for them to meet their repayments the more likely it is that staff will be made redundant.
More job losses, higher costs for business and the recent significant drop in the value of the pound all add to inflationary pressure.
We would have liked to have seen a cut of at least a quarter of a percentage point with a further reduction in November when the Bank thinks inflation will peak.
A cut in rates yesterday would have lifted the gloom just a little at a time when pessimism is as much a threat to the economy as the credit crunch and rising food and energy prices.
The Bank will insist it is doing the right thing by concentrating on controlling inflation. The average mortgage payer might beg to differ.
Your Say Your Worcester
Alan2, Worcester says...
4:52pm Fri 5 Sep 08
Common Sense, Pershore says...
5:33pm Fri 5 Sep 08
The Conservatives bounce into power on public disillusionment with Labour - put it right again (mainly) and then they blow it completely by decending into a mire of sleaze!
Oh, for an honest politician - but that's now a contradiction in terms!
Alan2, Worcester says...
7:07pm Fri 5 Sep 08
The economy that the Labourites return to the Tories in 18 months to two years time will be in a state of near collapse. Massive borrowings will have to be repaid because Labour and Darling are not going to even attempt to repay anything before then for fear of upsetting the populace further by having to make further tax increases.
It is going to fall on the Tories to sort it out and at the moment George Osborne is an unknown quantity. He will have an almighty job on his hands after the disasters left by Brown and Darling and only time will tell whether he will make it worse or if he can perform a miracle and put some money back in the cupboard which at present is totally empty and bare.
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Ideally, rates would have been reduced
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crowquill, Pershore says...
12:21pm Fri 5 Sep 08
The interest rates have been keep artificially low for too long to generate labours "economic miracle” and have led to nation that is massively overdrawn as a result of cheap credit. Dropping the interest rates will just encourage more debt and prolong the problem. Also what about the state of the pound which is now at and all time low against the dollar and the euro, dropping rates will cause it to sink lower causing inflation to rise as the price of everything to increase (remember we have to import just about everything on this island) Last but not least what about those people who have not been reckless and spent money they did not have. What happens to their savings when interest rate are driven down?
The bottom line is last twenty years boom has been smoke and mirrors built on a mountain of debt, the debts are now being called in and if you have been stupid enough to be drawn into this then the next couple of years are going to painful.
Don’t spend money you don’t have.