How low can we go?
Peter Hoskin 4:45pm
Fraser's already raised the most important question hovering over today's rate cut: that is, what options are left once the rate-cutting route has been exhausted? But there's another question in the air, touched on by Mike Smithson over at Political Betting: just how low can we go? We're already at the lowest base rate in the Bank of England's 315 year history, and bookies are offering odds on rates hitting 0 percent by the end of the year (20/1 according to the Ladbrokes press release that hit my inbox earlier).
Politically, I can't see the downwards trajectory of interest rates doing much to help Gordon Brown. Of course, the cuts are intended to have more than one effect, but the fact remains that they're just not having the dramatic impact on mortgage rates that both the Bank and the Government were hoping for. In turn, this leaves room for the Tories' saver-friendly approach to become more and more electorally potent as the base rate approaches 0; even if Anatole Kaletsky isn't a fan...
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Rhoda Klapp
January 8th, 2009 5:08pm Report this commentSomebody, please remind me how the hell this is supposed to work. In actual words, not economists shorthand. I say again, if 2% isn't working (and I don't understand the mechanism whereby it can, in the real world) then how will 1.5% or 1% or 0 work? It will flatten the pound, but nobody is buying any exports we have, and the effect on imports we MUST buy is not going away. It will undermine confidence. It will encourage personal retrenchment, not spending (this is probably good). It will not put working capital into the hands of business. It may help unviable business to stay afloat, maybe, for a while.
Is this just a case of do something rather than do nothing?
Isn't the BoE independent now? They seem to be doing this at Brown's behest, just like the old days.
Somebody tell me how this is supposed to work. Labour luvvies, Draper commandos, anybody?
Rhoda Klapp
January 8th, 2009 5:19pm Report this commentI went over to the Times for the Kaletsky explanation. Completely Loony. 300+ comments and about two agree with him.
The Watcher
January 8th, 2009 5:40pm Report this commentYeah his prescription for savers is right up there with "Let them eat cake!"
Verity
January 8th, 2009 5:44pm Report this commentRhoda K - When I saw this headline, I came onto this post specifically to quote you from an earlier post. I hope you bang away at your point, which no others in what we laughingly refer to as "the government" seems to have thought of, or are too frightened to articulate.
Susan Hill
January 8th, 2009 5:58pm Report this commentThey should have cut interest rates by 1% a year and a half ago but King was obsessed by fear of inflation, inflation. It would not have helped re-toxic debt from America swilling our way thanks to the idiocy of the banks but it would have eased things at the right time for businesses - and consumers. But no, they held off, worried about inflation until they were in the middle of a depression and then they panic.
I look forward to the date when interest rates are - 1%, as I heard someone actually suggest today.I have a tracker tracker mortgage so in theory THEY would have to pay ME.
It`s the stuff of Alice through the Looking Glass.
JONNY
January 8th, 2009 6:23pm Report this commentJust wondering how many thousands of gold ingots Kaletski is secretly snaffling aside for his own plush old age.
Maybe they should force him out of his cover to blow the lot on fifty tons of sales garbage.
Hysteria
January 8th, 2009 9:28pm Report this commentI read AK today - bonkers - the man has little credibility in IMHO
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