Rates Still 5%
In a frank interview at the weekend Alistair Darling said that the UK, and other countries, were facing the "worst economic crisis in 60 years". Whether that’s totally true or not, it does paint a grim picture, considering he thinks the economic situation is nearly as bad as it was in the years just after the last World War.
What can not be disputed is that credit is hard to come by, inflation is more than twice what the government wishes it to be, the price of oil, gas & electricity is extremely high and so are the costs for food and distribution. Furthermore, consumer confidence is down, property prices are falling and unemployment has increased.
Yes, these are challenging times for every UK business from the big corporations to the SMEs. The OECD has predicted negative growth in the size of the UK economy this quarter and the next. Two consecutive quarters of economic contraction is technically a recession.
So what bearing has this grim economic backdrop had on the Bank of England and its Monetary Policy Committee? The minutes (104k PDF) of August’s interest rate decision show seven members in favour of a rate freeze, one an increase and another a decrease, however, this month, we will not know until the minutes are released.
Whatever the decision, the Bank has kept rates at 5% for the fifth consecutive month in a row, so how long they can hold out against calls for a decrease in the rate to help struggling business or to increase the rate to allay inflationary pressures remains to be seen.