Interest rates result – 6-3
In the recent meeting of the Bank of England on interest rates, six members of the Committee voted in favour of keeping bank base rate at 0.5% whilst three members voted against with Andrew Sentance preferring to increase bank rate by 50 basis points.
The MPC evidently felt that the boom in global commodity prices was still the primary driver of inflation, so took the view that increasing rates would prejudice a shaky recovery.
Subdued lending means that it is vital to the property market that the limited number of mortgages remain affordable. One opinion was that pushing up the base rate would make lenders even more nervous about borrowers’ finances and strain household budgets, which could do lasting damage to the health of the property market.
Whilst inflation remains a concern it seems that the priority is economic growth.
So, the Bank of England not only escapes from the credit crunch without any blame but it’s to be given enhanced powers. Is this justification though for expecting it to be able to save us from what’s being called ‘inflation’ but is really just plain old ‘price rises’? The BofE can’t even control events clearly within its remit, let alone those clearly outside it.
Bank of England head honcho Mervyn King gets his K (OBE) but, one wonders, what for? I mean, where was he during the credit crunch and what did he do then or has he done since? He got a salary while he was there, didn’t he? It’s commonly known there’s an even bigger crunch coming anytime soon because the people supposed to be in charge (arise, Sir Melvyn, for instance) resolutely refused point blank to address any of the real issues involved, so what’s he getting his gong for? Not leaving the tribe all the way maybe, remembering he said of all the banking systems possible the one we have is the worst? Was this his fee for keeping shtum about more contentious issues?