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Latest: Banks faces calls for 1% cut (6 January)
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Commentary from the Editor (6 January 2009)
The latest predictions: British interest rates currently stand at 2%: they will soon hit 1% (a cut to to 1% or 1.25% this week is probable) with a possibility of going all the way to zero in the next few months.
The history of recent cuts:
The MP
It's easy to forget that in mid-September economists only expected rates to fall to 3.5% by the end of this year. And in August, MPC member Tim Besley was still calling for a rate rise.
In the US, the Federal Reserve reduced official interest rates to a range between 0% and 0.25% on 17 December. It was a far more radical step than most economists had predicted. The move could be copied by the Bank of England.
The rate decision factors: The Bank of England MPC needed to slash rates to help ease the threat of recession. But its primary aim is to control inflation, which is now 4.1% against a target of 2%. However, a plunge in the oil price from nearly $150 a barrel last summer to less than $40 means inflation should evapourate in coming months.
Also, December and January is a crucial time for retailers. If festive trading is worse than expected it would mean less inflationary pressure, which in turn would make the MPC keener to make bigger rate cuts.
Latest:
- UK ba
Commentary from an economist (6 January) 'Sterling's current serious weakness and vulnerability may also deter the Bank of England from cutting by more than 75 basis points next Thursday. Further out, we expect interest rates to fall to a low of 0.50% in the second quarter of 2009 and then stay there for the rest of the year. However, it is far from inconceivable that interest rates could come all the way down to zero.'
What readers say:
>> How low will rates go? (Dec 2008)
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A selection of news, analysis and comment
>> Banks faces calls for 1% cut (6 January)
>> Bank rate of 1% threatens sterling crisis (4 January)
>> 'We are in uncharted economic territory' (21 December)
>> Shock as US interest rates slashed to 0% (17 December)
>> US interest rates at 0%: analysis by Alex Brummer (17 December)
>>Sterling slumps further on rate cut hopes (16 December)
>> Falling fuel prices bring down inflation (16 December)
>> MPC member warns of gloomy 2009 (11 December)
>> Pound slumps on fresh rate cut fears (5 December)
>> Rates slashed from 3% to 2% (4 December)
> POLL: Where will rates be at the end of 2008?
>> 30-second guide: US interest rates
Mortgages and property: latest stats, deals and advice
Mortgage and Libor rates
Latest Libor rates with commentary.
Mortgage rate impact
- Average best two-year fixed rate mortgage (5 Jan): 4.54%
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BACKGROUND:
AND DON'T MISS:
- The oil price (which has a critical impact on inflation)
- Inflation (a history and explanation on calculating your own rate)
- Exchan
- The credit crunch
- House prices
- UK L
Howard Archer of IHS Global Insight said: 'We expect the MPC to reduce interest rates by at least a further 75 basis points from 2.00% to 1.25%. While an even bigger cut could well occur, we suspect that the MPC may well prefer to moderate the pace at which it is cutting interest rates as they near zero and to allow the previous large cuts more time to feed through and take effect.
>> Poll: What will the ba
Pressure mounted on the Bank of England for a full one percentage point cut in interest rates when its monetary policy committee concludes its meeting on Thursday.
The Bank of England is expected to cut interest rates yet again this week in a move likely to send the value of the pound plummeting.
Tim Besley, the MPC member who called for a rate rise in August, gives his view on the outlook for 2009.
Calls grew for zero rates in the UK after a drastic move by America's Federal Reserve.
The decisions taken by the Federal Reserve last night are the most radical in the history of the American central bank - but fraught with danger.
Sterling continued its vicious slide against the euro today as traders bet a bout of deflation will see further aggressive interest rate cuts next year.
The largest fall in fuel costs since records began helped bring annual UK inflation down to 4.1% last month from 4.5% in October, official figures showed today.
Long-serving MPC member Kate Barker says she does not believe the slump in the UK economy will stabilise until the end of next year.
Sterling was on course for its worst week ever against the euro as economists slashed their estimates for interest rates in 2009 - a reflection of the UK's weakening economy.
The Bank of England made another bold cut in rates amid signs of a deepening recession.
VIDEO: The Mail on Sunday Economics Editor explains how you can predict interest rates
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(See the rate rise calculator at the foot of this page)
- Libor is a rate that banks lend to each other in the UK and is therefore a measure of how much they trust each other and a measure of the state of the credit crunch. Libor and swap rates are used to price new mortgages. In normal conditions, the three-month Libor rate should be just 0.1-0.2% higher than the bank rate. But it soared far higher in August 2007, marking the start of the credit crunch.
Source: Moneysupermarket
One week ago: 4.59%
Two weeks ago: 4.68%
Three weeks ago: 4.75%
Early December: 4.92%
Early November: 5.54%
Early October: 5.7%
Early September: 5.7%
Early August:6.15%
Early July: 6.45%
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Interest rate rise / fall calculator
READER COMMENTSComments so far (105)
1.
bad move to keep interest rates on hold, they need to go up slowly to cut down on the pain later, really bad move.....
- Steve, Suffolk
Posted: 8 April 2007, 9:00am
2.
People have no idea that holding the rates will just give people a false hope on an already false economy.
- Kal, Bristol
Posted: 30 April 2007, 9:02pm
3.
New Labour - like many new things it cost a lot more than it is worth! Tony sold us a policy but the small print seemed to miss the point. I am one of those 'lifted out of poverty' and much, much worse off than ever. Yet a single parent is given over 450 GBP per week with housing priority and, in many cases, never having worked a day their lives. Now of course our prudent chancellor is now our P.M. having found our economy is not improving but going down the nick. Politics - very confusing. We also have been blessed with numerous quangos who insist on issuing bits of paper in lieu of something or other. Then our millionaires are now billionaires and only pay less tax than their cleaners. It would be so nice to understand just what is what and who might be able to explain it. I keep hearing something about dot.com being pretty good saving us from lots of expenses. Someone tells me that tennis balls are now puncture proof and not all fairies have wings. Hark angel carry me away!
- Barry, Calne, Wiltshire, UK
Posted: 5 July 2007, 6:16pm
4.
We need interest rates of above 10% to slow down property prices... the chances of this happening are very unlikely hence no chances of property crashes nor the likelihood of a slow down.
- Mofz, London
Posted: 19 July 2007, 10:39am
5.
I think people who save and thereby cut their earning should benefit by the increase in savings, instead of the persons who benefit by borrowing the savers money, and gaining by inflation of house prices going up because of artificial demand.
- John, Suffolk
Posted: 31 July 2007, 12:17pm
6.
The only way to stabilise the economy is to stop interest free loans, ban buy now pay later deals, enforce a minimum 10% deposit on all credit agreements, limit mortgage loans to 100% of valuation, enforce maximum credit card limits. All credit agreements for under 21-year-olds to be supported by approved guarantors.
- Mike, Epsom
Posted: 17 September 2007, 12:13pm
These are the first 6 of 105 comments
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