The Bank of England has responded to the credit crunch by cutting interest rates by one quarter of a point to five percent, the third cut in five months.
It acknowledges the risks of stoking inflation but says the availability of credit seems to be worsening.
With the difficulties of finding loans so painfully apparent and the housing market in dire straits, do you think it is being too cautious? Should it have cut more?
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4 comments so far
The bank’s remit is to
(i) keep inflation under control and
(ii) maintain the stability of the economy.
House prices should not come into it, though it may be argued that they impact (ii); but in that case rates should have been upped whilst house prices have been soaring in recent years. You can’t have it both ways.
- Posted by BenRPI=4.1% and looks likely to increase further. Rates should have been kept where they were or pushed higher. There are too many short term vested interests at play here
Rates should have been dropped today, and further drops are needed in the future.
We do need to see more responsible lending by banks in the future. I am happy to see the end of 100% + mortgages.
- Posted by DavidHouse prices are well overvalued, it won’t help that the government are attempting to prop up something that is overvalued. They should have thought about this when they changed the way inflation was calculated removing H/price inflation 5 years ago ignoring true inflation so they could boast of a low inflation economy, fueling the bubble only encouraged greedy buy to let investors. Well the music’s stopped and most of the banks aint got a chair
- Posted by MichaelHouse prices will always be linked to earnings, after all they they always have been. Inflation is the real enemy, wrong play again Gordon/Mervyn
Base rate reductions are passed quickly on to savers by even greater reductions in savings rates, but not to borrowers via their mortgages. What is more, base rate reductions risk increasing the rate of inflation, so the general public stand to lose out there too. Who actually gains from base rate reductions? It seems to be BANKS (yet again) - inflation wiil help reduce the scale of their debts, as will the discrepancy between savings and borrowing rates.
- Posted by AW