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Does the base rate reduction mask further troubles ahead?

Concerns are mounting that the 1.5% reduction in UK base rates was a knee-jerk reaction to figures which are not as yet available in the public domain. Many experts, who have years of experience in economic downturns, cannot recall the Bank of England being so radical and so aggressive with its base rate policy.

The MPC has historically been a very conservative group and the 1.5% reduction is way beyond the wildest dreams of many economic observers. While it is not officially recognised, it is common knowledge that the Bank of England will be in receipt of trends and aware of data which is due to be announced over the coming weeks, some of which may have a material impact on investment and money markets. It is this ability to examine incoming information prior to release which is concerning many and may be behind the sharp reduction in base rates.

Those who have criticised the MPC in the past must now be eating their words and if this latest interest-rate reduction does the trick for the UK economy they may be hailed as saviours of the UK. Saviours and the MPC are two phrases which nobody could have connected prior to this week.

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