The Money Stop

At the start of this year there were high hopes about base rate cuts amongst both borrowers and industry officials, with many expecting the base rate to fall significantly over the course of this year, and with some industry officials predicting that the base rate could fall as low as 4% or below by the end of the year. However, whilst the base rate was cut three times between December 2007 and April of this year, it seems that further rate cuts could be put on hold, as the Bank of England tries to deal with soaring inflation levels.

Mervyn King, the Governor of the Bank of England, has already had to write to the Chancellors, Alistair Darling, after inflation recently soared beyond the government’s 2% target, coming in at 3.3%. He had to explain why this had happened and what was going to be done to try and bring it back under control. However, things have since got worse and inflation levels have soared even further out of control, with some predicting that they could be higher than 4% by the end of the year.

King said that whilst he was aware of the pressures facing the economy at present steps had to be taken to reduce the rate of inflation.

He said: ‘The economic slowdown will need to be sufficient to ensure that inflation does not persist above the target.’

He added: ‘But at the same time, we need to avoid a slowdown that is so pronounced that it would pull inflation down, not just to the target, but below.’

There is now a general opinion that rates will not fall in the foreseeable future, and there is even speculation that the base rate could rise if inflation does not start to fall. One economist recently stated: ‘What is apparent from the testimonies, is that if the Bank of England does change interest rates in the near term, it will be to raise them.’

Recent Additions:

• Homeowners flock to try and sell homes
• Many people could find it even more difficult to sell their homes
• Consumers looking to remortgage could experience problems
• Majority of parking fine appeals won by consumers
• Banks make huge profits from overdraft fees

Related Posts

Interest rate cuts ‘cannot be banked on’

Despite consumers anticipating that interest-rate cuts will take place throughout the year, it is likely that if further cuts are made they will be done so cautiously, one financial expert has claimed. According to the

Three interest rate cuts predicted for 2008

According to city economists homeowners in the UK will be able to enjoy easier financial management next year with predictions that interest rates will fall two or three times over the course of the year.

Does inflation level mean that rate cuts are ruled out?

Inflation levels over recent months have been soaring, and in July inflation hit the highest levels since records began in 1997. coming in at 4.4%. In fact, inflation has been soaring for quite some months,

Interest rate cuts may not affect credit availability, says expert

The Bank of England's interest rate cuts are unlikely to have an effect on the declining availability of credit, says economic research consultancy Capital Economics.Lenders reported that during the first quarter of 2008 they had

Foreign savings accounts back at the top of the best buys

Over the past couple of years consumers in the UK have seen a number of foreign banks enter the UK market, offering impressive interest rates on savings accounts and catapulting themselves to the top of

Impact on Northern Rock could have been softened

In a recent report the chairman of the Financial Services Authority, Callum McCarthy, has stated that the impact on stricken lender Northern Rock could have been softened had consumers been made more aware of the

Interest rate stays at 5%

Following the July Monetary Policy Committee meeting last week it has been announced that the base interest rate is to remain on hold at 5%. The Bank of England cut the base rate three times

HMRC offers huge reward for return of sensitive data discs

Following the huge blunder where two discs containing the bank and personal details of 25 million people were lost by HM Revenue and Customs a huge reward has been offered by official for the safe