Friday, 6 February 2009

Word of the week

The Bank of England cut interest rates again this week to 1% taking us back 300 years when this level was last reached. The decision by the Monetary Policy Committee, who voted that borrowing should be made even easier, received an ambivalent reaction despite the stated intention to assist businesses and homeowners starved of credit. The Federation of Small Businesses commented that the rate cuts were not helping but hurting savers needlessly when alternative stimulus measures were needed. This view is encouraged by the government’s continued struggle to force the hand of the corporate lending markets. Many businesses, particularly SMEs, are seeking help via state intervention but the government is uncomfortable with further action including taking board positions on the country’s biggest institutions. Such action, however, may be inevitable as the slide in interest rates has now reached unprecedented lows.


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