Will UK base rates rise in 2010?
Today's minutes from the latest MPC meeting indicate that all members of the committee were in favour of maintaining UK base rates at 0.5% although there is growing concern about inflation. It looks as though the recent weakness in the UK currency has caught the attention of many MPC members and there is now speculation that UK base rates could indeed rise before the end of 2010, to offset the threat of inflation.
As we have discussed on numerous occasions, there is a need to balance out the threat of inflation against the liquidity required to push the UK economy back on to the growth path. This is a very difficult balancing act which the UK authorities will need to address and get right in the short to medium term otherwise the UK economy could be plunged back into recession.
There is no doubt that increased base rates will lead to a better environment for savers in the UK, many of whom have been forced to dip into their nest eggs purely and simply to cover their everyday bills. Despite promises from regulators and the government it seems that savers in the UK, despite offering no risk to the financial sector, have been forgotten with money being spent on those in financial trouble.
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