Bank of England and ECB leave rates on hold
With the euro zone under more and more pressure and the debt markets still struggling to pull clear of the recent turmoil the European Central Bank yesterday confirmed that rates will remain unchanged for the foreseeable future. This was a situation facing the Bank of England only hours earlier where the MPC decided to maintain UK rates of 0.5%. So what are the prospects for European and UK base rates in the short-term?
Unfortunately it does not look good for European and UK savers in the short to medium term with economic uncertainty, budget cuts and turmoil in the debt markets unlikely to lead to higher base rates for the foreseeable future. The need to maintain rates at relatively low levels is paramount in the fight against a double dip recession as more and more companies feel the harsh winds of recession blowing through yet again.
The other possible fly in the ointment could be inflation which has been fairly strong in the UK in the early months of 2010. Even though the Bank of England believes that UK inflation will subdue in the second half of 2010 this remains to be seen as there are concerns that higher inflation could force the Bank of England to move base rates upwards and curtail any short-term economic recovery.
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