Assetz® News » HOME | RSS Feed FEED | LIST ALL ARTICLES | ASSETZ HOMEPAGE
Investment Property News from Assetz

Assetz® Property News Service

Bank Of England likely to drop base rates very soon

28th September 2008 | back to article listings BACK    print this article PRINT

I sense a distinct possibility that the Bank of England is going to drop base rates before the next meeting in October. Several strong hints from MPC committee members over the last week, the US bailout about to be agreed tonight and other central banks beginning to discuss and even implement concerted moves to stabilise the economy. It would be no surprise to see the MPC meet before their next meeting and drop base rates by at least 0.5% and in today's times anything is possible and a full 1% off base rates before Christmas is extremely likely although we actually think it will take a bit longer than this.

We are moving our official view that base rates will begin to fall in October rather than December and I would say there is at least a 20% chance of base rates being cut early this week rather than waiting for the official meeting later in the month.

In addition to that we now expect base rates to fall to 4% rather than 4.25% and probably by February or March rather than April next year.

Oil prices are similar to what they were around six months ago - the inflationary effect of oil is already beginning to fall out of the index. In just the same way that the retail figures are skewed by people switching from one product to another and apparently showing retail continues with no real weakness, a similar thing is going on with food and petrol - people are cutting back and switching product to lower-cost versions and it is extremely likely that this is not reflecting properly in data being reported meaning that we could see deflationary effects already having come into the system before anything measuring this shows it up.

One example is fuel prices at the pumps, still quite high when oil has fallen back but people have taken action already and reduced their mileage not just here in the UK but in the US. The high pump prices indicate inflationary effect is eating away at people's wages but the reduced usage is pulling the true cost back. The same is happening on food with a significant switch away from organic food and premium brands into lower cost brands and shops. People are dealing with inflation in their own way and I'm pretty sure the Bank of England knows this and will take action before inflation starts to fall back naturally.

There is no sign of wage inflation taking hold at all and we would expect next April's wage bargaining season figures to show a lower wage inflation than last year. Perhaps 3.4% versus the 4% danger figure. Plenty of scope again for the Bank of England to drop rates.

This news story has come from the property investment blog by Stuart Law, CEO Assetz plc.

Assetz® is a UK and International Property Investment Specialist. Please visit our property sites shown below.

Assetz for Investors UK Assetz Hotels Assetz Homes Assetz International Assetz France Assetz Spain Assetz Cyprus Assetz Germany Assetz Portugal Assetz Ski Assetz Cape Verde Assetz USA Assetz Finance Assetz Fund Management

Accessing the news service

You can view all of the Assetz® UK, International and UK Property Investment Articles and News here.

We also provide an RSS Feed Feed of the news service, or you can view all articles. Click here to view more information on RSS readers and how they make reading online news more convenient.

eXTReMe Tracker