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Will UK base rates go any lower?

As the Bank of England confirmed that UK base rates will remain at 0.5% for at least the next month, there is a growing feeling, despite a request from the British Chambers of Commerce, that UK base rates have bottomed out. It seems likely this could be the case unless there is a dramatic falloff in UK economic activity in the short to medium term, at which point you may see rates edge a little lower.

It will be interesting to see how the markets react in the short to medium term because while the Bank of England has refused to increase rates in the short term it is also confirmed that quantitative easing will still be in place. However, thankfully it looks as though the £50 billion injection last month could be the last, something which will see UK tax payers breathe a sigh of relief.

Against this backdrop of low UK base rates, a significant quantitative easing program and a feeling that the UK economy may well have turned, the UK stock market has risen to an 11 month high. Whether investors have the nerve to push the market higher in the short to medium term remains to be seen but the psychological 5000 barrier was breached even if the market closed below the level at the end of the day.

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