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UK base rates fall to 0.5%

As expected the Bank of England has today reduced UK base rates to 0.5% which is an all-time low although there is speculation they could fall further in due course. The authorities have also indicated a move towards quantitative easing which will see the Bank of England buying up an array of assets from UK companies in order to increase liquidity in various business sectors.

While the move towards quantitative easing has been broadly welcomed by business leaders, the 0.5% reduction in UK base rates has not been as well received. Many are concerned that the government is still reducing UK base rates at the same time as introducing quantitative easing into the equation when in reality base rate reductions are having little or no impact on the cost of credit in the wholesale money markets.

In reality the power of base rate cuts was reduced substantially once it became apparent that it was more of a confidence factor which was holding back the UK economy. There is also a perception that as UK base rates fall further the financial sector, which has already received billions upon billions of pounds of taxpayer's money, will be able to expand profit margins and profit from the doom and gloom prevalent throughout the UK.

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