Bank of England reduces Bank Rate by 1.5% in unprecedented move

[Chris Coles]

UK interest rates slashed to 3%

The Bank of England has made a shock one-and-a-half percentage point cut in UK interest rates to 3%, the lowest level since 1955.

http://news.bbc.co.uk/1/hi/business/7713006.stm

[c1ue]

Re: Bank of England reduces Bank Rate by 1.5% in unprecedented move

Yes, and? 'Beggar Thy Neighbor' continues.

Also today:

ECB cut 0.5% to 3.25%
Swiss CB cut 0.5% to 2%
Czech CB cut 0.75% to 2.75%

[D-Mack]

Re: Bank of England reduces Bank Rate by 1.5% in unprecedented move

I don't know why people act so surprised

Financial crisis: Interest rates to hit lowest level since 1694

Interest rates may have to be slashed to the lowest level in more than 300 years, experts have warned.

By Edmund Conway, Economics Editor
Last Updated: 11:07AM BST 17 Oct 2008


The Bank of England faces cutting borrowing costs to beneath two per cent - or even as low as one per cent - within months as it battles to protect Britain from the financial crisis and the worst recession in decades, economists said.

Such a drastic move would bring rates, currently 4.5 per cent, to their lowest level since the Bank was founded in 1694.

The rate cut would be good news for borrowers, who have faced sharp increases in their mortgage rates as embattled banks have raised the cost of borrowing in recent months.

...

http://www.telegraph.co.uk/finance/e...ince-1694.html

[Mega]

Re: Bank of England reduces Bank Rate by 1.5% in unprecedented move

You can smell the panic here in "Blighty".

Ho Ho Ho
Mike

[Starving Steve]

Re: Bank of England reduces Bank Rate by 1.5% in unprecedented move

Why would a bank be compelled to lend money at new lower rates dictated by polit-bureaucrats at the Bank of England? The market says otherwise.

Similarly, I now have the option to take a first mortgage on a house in Minnesota at 7%, but why would I do so? The rub is that 7% is barely an adequate return since my energy stoxx earn that in dividends and get better tax treatment in Canada beside. Why then, lend at 7%?

I ran a business in Colorado for a few years and cashed cheques for the military in Colorado Springs. I used to charge $80 to front $50 in cash so that soldiers could go drinking....... And to my surprise, this was barely a profitable venture. Fun it was; profitable it was NOT.

Mortgage money has to be worth about 10 or 11% now on excellent first mortgages. Am I wrong?

Oh, but daddy will lend at 7%.... Not that I want to.

[Mega]

Re: Bank of England reduces Bank Rate by 1.5% in unprecedented move

I think we see a "De-couping" of Bank rates & REAL RATES!

EG BOE rate 3%........loan rate 8%!
Mike

[grizam303]

Re: Bank of England reduces Bank Rate by 1.5% in unprecedented move

I think we see a "De-couping" of Bank rates & REAL RATES!

EG BOE rate 3%........loan rate 8%!
Mike

Isn't that what the TED spread business is about? Or are you just saying the banks' costs can be whatever, and that the loans they give out could be astronomical?

[GRG55]

Re: Bank of England reduces Bank Rate by 1.5% in unprecedented move

I think we see a "De-couping" of Bank rates & REAL RATES!

EG BOE rate 3%........loan rate 8%!
Mike

It's very simple gentlemen. Banks make money by borrowing short and lending long. The steeper the curve, the higher the spread. The higher the spread the greater the risk free profits the banks can generate. And there is nothing the Central Banks of the world, and most especially the Central Banks in Europe, desire than promoting risk free profits so the cratered up banking sector can rebuild balance sheets.

Just think back to how long its been since we had an inverted yield curve in any developed nation jurisdiction. Greenspan's interest rate "conundrum" is an artifact of history now. And it's the absolute last thing any Central Bank wants now.