Oh yes, nearly forgot, the Bank of England lowered interest rates yesterday.
As a result, some banks followed suit and lowered their rates. But then again, others upped their rates. Some of the media have slammed Mervyn King for whimping out, saying he should have cut rates by even more. It’s just, right now, actions by the Bank of England seem a tad irrelevant.
It’s the rate the banks are lending to each other that counts. Oh, and they also want more savers – so they need to up rates to reel them in too.
Still, at least the currency markets seem to care. Look at how the pound has fallen against the euro of late?
Then again, the dollar has fallen against the euro.
Now, remember what the IMF said earlier this week. The UK’s economic cycle lags between 12 and 24 months behind the US. If there is any truth is that statement, then expect a certain amount of activity with sterling over the next year or so.
Just remember that law of Sir Isaac Newton – what goes up, must come down.
PS – Last year, Martin Weale at the National Institute of Economic and Social Research said interest rates may need to hit 8 per cent before savings levels rise to the level required to hit the long-term savings gap. Just bear that in mind when central banks try to solve this crisis by trying to persuade us to borrow more.
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