UK base rates to remain low for the foreseeable future
UK base rates are almost certain to remain at historically low levels for the foreseeable future after yesterday's disappointing gross domestic product data. Despite the fact that the Bank of England has injected billions upon billions of pounds of liquidity into the money markets there is no sign of a full steam ahead recovery in the UK economy. As a consequence, unless inflation balloons out of control, it is unlikely that UK base rates will change for the vast majority of 2010 with growing concern about a potential double dip recession.
If inflation does continue to rise and becomes more of a threat to the economic recovery than it is at the moment the Bank of England will have a very difficult decision to make. If they push UK rates higher then this will effectively stop the food which is feeding the UK recovery and we could be back to square one, but if inflation strengthens then the situation could become much worse and threaten the medium to long-term future of the UK. These are very difficult circumstances for the Bank of England to consider, and with each conflicting economic data report comes more questions and fewer and fewer answers.
Share this..
Related stories
ECB holding off bond purchases
In a show of confidence in the euro zone economy, the European Central Bank (ECB) has today confirmed only a minimal purchase of bonds last week as a way of attempting to shore up the European economy. The €10 million acquisition of bonds last week is minimal compared to the billions of euros spent in May this year. So why is the ECB holding back? Despite earlier concerns that the Europea...
Read MoreIs the UK economy at the mercy of overseas central banks?
It is no secret that Gordon Brown has been touring the world over the last few months to try and bring together various governments and central banks to refloat the worldwide economy. As the UK government debt moves towards the £1 trillion level there is a feeling that the UK has limited funding available to make any real difference in the short term. In many ways the plight of the UK is linked v...
Read MoreEmergency budget knocks consumer confidence
Despite the fact that the UK government was effectively forced into announcing an emergency budget on 22 June, as any government would have been, it seems as though this has impacted upon consumer confidence in the short-term. A report by uSwitch confirms that 45% of people in the UK are concerned about their finances and 49% now feel worse off than ever before. So what can George Osborne do to tu...
Read MoreUnemployment now higher than when Labour came into power
Despite the billions upon billions of pounds invested into the UK economy over the last 13 years the very fact that UK unemployment is now higher than when Labour came to office is a bitter blow for Gordon Brown. When you also consider that more than 50% of the UK workforce now depends upon the state for employment, a figure which is far higher than when Labour came to power, the situation could b...
Read MoreLord Mandelson refuses to support Vauxhall deal
Despite only a few weeks ago suggesting that the UK government would be behind the Magna deal to acquire GM Europe, Lord Mandelson has today suggested that the acquisition will not receive the support of the UK government in its current form. When you consider that literally thousands of jobs are at risk in the UK, primarily at the Vauxhall subsidiary, it seems very strange that the government is...
Read More