Common Sense Injected
Against all odds, and despite contrary predictions by many large news organisations, the August MPC Meeting today resolved to raise base UK interest rates by 0.25%, to 4.75%. This is the first time it has done this in 2 years, and means that rates are back to the peak reached in late 2004. Since the MPC’s decision at 12pm today, the FTSE has dipped by 1.5%, and the European Central Bank has followed suit with a 0.25% rate rise, taking their rates to 3%. The US Federal Reserve announces its decision on rates next week, after 17 back-to-back 0.25% hikes. The BBC has met the news by offering such pearls of wisdom as “there is concern that people have borrowed too much money” and “the biggest gainers from the rate increase will be savers”.
Meanwhile, Barclays have added their name alongside HSBC and Lloyd’s and become the third high street bank in as many days to announce that bad debts are skyrocketing, and that their provisioning fund has had to rise by 50% to over £1bn. Perhaps this is a problem that one 0.25% rate rise won’t quite be enough to solve on its own.
