The Great Debate UK
- David Kuo is director at The Motley Fool. The opinions expressed are his own. -
The Bank of England Monetary Policy Committee decided to leave interest rates unchanged at 0.5 percent in May. This came as no great surprise given that the Central Bank has already slashed interest rates to a level where further cuts would have made no discernible difference to the cost of money.
That said, there are other ways to drive down the cost of money. In this regard, the Central Bank still has plenty of gunpowder left in its keg to blast the UK economy out of the doldrums. So far, it has only printed two-thirds of the 75 billion pounds of fresh money authorised by the Government for quantitative easing. It can pump in another 75 billion pounds into the economy after that. So, in total, it has 150 billion pounds in its armoury.
It can be argued that the Bank now has little choice but to continue pumping money into credit markets through quantitative easing given that cutting interest rates has not worked. After all, the problem that that UK faces is not the cost of money but instead the quantity of money.
– David Kuo is a director at the financial Web site The Motley Fool. The views expressed are his own. –
The 2009 Budget could be the toughest that any Chancellor will ever have to produce. There is a gaping hole in the country’s finances. Alistair Darling, as custodian of the country’s cheque book, has to find a way to plug it. Not bridge it, not tiptoe around it, not spin across it, but to close it before it gets bigger.