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Monetary Policy Committee Reduces Interest Rates to 5.25%

7th February 2008 | back to article listings BACK    print this article PRINT

Commenting on the Monetary Policy Committee’s decision to reduce interest rates to 5.25%, Stuart Law, Chief Executive of Assetz, says:

“Today’s decision, to reduce interest rates by 0.25% was a necessary but somewhat belated decision as the MPC is forced to react to turbulence in the financial markets. The Committee was left with no option but to lower rates today, having abstained from doing so last month in a futile bid to communicate its control and independence in the face of possible political meddling.

“The decision to hold rates in January must have been taken with the view that a month’s delay would have little impact on the market, a gamble that was exposed as irresponsible with the stock market plunge seen towards the end of last month.

“While the Bank has not yet had to take the drastic steps seen in the US, its earlier decision to hold rates in January is likely to result in a series of further cuts this year, with another possibly as soon as April, to avoid any significant market downturn over the coming months.

“However, the situation is far from bleak for those with money invested in the property market. Reports from both Nationwide and Rightmove have indicated that the market is firming up again in January, with figures so far indicating a fall of between just 0 and 1% - far removed from the 9% stock market fall in the last month, and keeping our forecast of 5% growth in UK house prices a realistic outlook for 2008.”

 

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