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UK base rate cut by 0.5%

As expected the MPC has today reduced the UK base rate by 0.5% to a 314 year low of 1.5%. The move was pretty much as expected on the currency markets with speculation about a 0.5% reduction intensifying late last night ahead of the meeting. However, even now that UK rates are lower than they have been in the last 300 years there is intense speculation of further reductions in the short term. But if financial institutions are not passing on interest rate savings who is benefiting?

This is a very pertinent question and one which has grabbed the attention of both consumers and experts around the UK. If, as confirmed by many financial institutions last week, further cost savings are not passed on to customers then yet again this is a very expensive bill for the rescue of the financial sector. By reducing the cost of borrowing for mortgage companies and banks in general there are hopes that in due course customer savings will increase and liquidity will return to the market.

If we take a look back over the last few months the UK financial sector has been the beneficiary of hundreds of billions of pounds of UK taxpayer's money with very little return to consumers in any way. Once you peel away the surface of this latest move many taxpayers will be alarmed at the ever increasing cost of trying to reposition the UK banking sector.

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