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The Credit Cruncher was conceived to help you to keep up to date with credit crunch and recession developments, it provides some helpful credit crunch advice and it addresses personal debt. The Credit Cruncher also seeks to explain how the credit crunch started and shed some light on the worldwide recession. Recently, we have begun to look at how BREXIT will affect the UK economy. Please feel free to leave comments where relevant.

23 Dec 2010

Interest rates set to rise

It looks like the Bank Of England is trying to prepare the public for a rise in interest rates back up to what it feels is a normal level - which will mean the rates returning to a level of about 5% from the current 0.5%...
BoE official Paul Fisher is quoted as saying:
"...what we need to do is to trigger the mindset in people that that's where rates will eventually go back to,"
As if 'people' were stupid enough to think that this artificially low figure is the norm... I would have thought that the message would have been loud and clear if the BoE simply raised the level by 0.25% or 0.5% rather than just talked about it... If they were worried about 'people' panicking, they could have always stated that their 'target' figure is 5% at the same time as announcing an actual raise.

The way this has been done makes it sound like they are unsure of the impact of raising the rate and want to get an idea of what the reaction will be before they do it. The likelihood is that the raise will be implemented in small steps, but no indication whatsoever is given over how long this will take.
The background to policy changes are a relatively static economy showing little growth, a low sterling market value and creeping inflation - with the VAT hike about to strike, one must question the impact this statement by Paul Fisher will have on the householder. There is not much in the economic climate that is going to encourage householders to part with their cash (other than Christmas, which as far as I am aware is not as a result of Government policy..)

Personally, I think we are still in uncertain territory here in economic terms with the threat of the dreaded 'double-dip' still a possibility. I am making the most of the low interest rates by overpaying my mortgage, not by consuming more goods - any change in the interest rate for me will just mean an adjustment to my overpayment.

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