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Stuart Law, Chief Executive of Assetz, comments on this month’s decision from the Bank of England’s Monetary Policy Committee (MPC) to hold interest rates at 5.0%

4th September 2008 | back to article listings BACK    print this article PRINT

“The Bank is playing a dangerous waiting game by stalling on a necessary cut in interest rates for another month.

“The recent spike in inflation has been driven almost entirely by oil and food pricing. However, it is now a year since the credit crunch began, and while rates for tracker and fixed-rate mortgages have fallen back to levels seen a year ago, delaying on a further cut in interest rates risks further stagnation to the market.

“Oil prices have fallen sharply recently and are already back to levels seen six months ago. Furthermore, it is looking likely that oil will record zero inflation over the next few months, which will help CPI inflation come down significantly next year. With this in mind I cannot see the Bank justifying a delay in reducing the base rate reduction past November this year.

“Interest rates will need to fall sharply to bring the economy back to a reasonably strong growth mode and at the moment it is looking like they will need to come down to as low as 3.5% by around the end of 2009. Unfortunately it looks like the Bank will continue to stall on a rate cut for another month at least, and it will take even longer for them to bring rates down to the required level. Rates will probably fall to at least 4.25% by April next year, although this should really happen sooner.”

Managing Director’s Blog: http://investors.assetz.co.uk/blog/archives.php

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/4422.html. Alternatively, please see our full press release archive.

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