Interest Rates and Economic Stimulus
Discussion
Is it just me that doesnt get this?
We're apparently going to get another 25bp-50bp cut this week.
What is it going to do though?
If there is no money supply surely the interest rate is largely irrelevant?
Its like saying 'You can buy this 911 Turbo for 1p but we dont have any in stock' surely?
Also isn't an interest rate drop diametrically opposed to lending liquidity in so far as why would banks lend for no return?
Yours
Thick of Berkshire.
We're apparently going to get another 25bp-50bp cut this week.
What is it going to do though?
If there is no money supply surely the interest rate is largely irrelevant?
Its like saying 'You can buy this 911 Turbo for 1p but we dont have any in stock' surely?
Also isn't an interest rate drop diametrically opposed to lending liquidity in so far as why would banks lend for no return?
Yours
Thick of Berkshire.
Plotloss said:
Is it just me that doesnt get this?
We're apparently going to get another 25bp-50bp cut this week.
What is it going to do though?
If there is no money supply surely the interest rate is largely irrelevant?
Its like saying 'You can buy this 911 Turbo for 1p but we dont have any in stock' surely?
Also isn't an interest rate drop diametrically opposed to lending liquidity in so far as why would banks lend for no return?
Yours
Thick of Berkshire.
It is relevent, for savers at least.We're apparently going to get another 25bp-50bp cut this week.
What is it going to do though?
If there is no money supply surely the interest rate is largely irrelevant?
Its like saying 'You can buy this 911 Turbo for 1p but we dont have any in stock' surely?
Also isn't an interest rate drop diametrically opposed to lending liquidity in so far as why would banks lend for no return?
Yours
Thick of Berkshire.
Nationwide won't pass on anymore cuts in the base rate to those on tracker mortgages. Most other banks will follow suit as they need a margin to earn from mortgages. You can bet your ass they will pass on the cut to savers though.
We're going to do a 90's Japan.
It's confusing me as well.
The BoE rate can keep coming down but it will have a diminishing effect on many people because the rate has a poor correlation to the rates people actually pay for borrowing.
Until LIBOR eases , tinkering with the BoE rate will not have a big impact for many.
But it does get headlines. And it also brings the debate back about how the banks are not passing the rate on to borrowers and how the Gov are going to " have strong words with the banks" to " help struggling families" and all that b
ks...
I welcome a reduction of the BoE rate however. The only financially prudent decision I made in the last 18 months was to get a BoE tracker mortgage..
The BoE rate can keep coming down but it will have a diminishing effect on many people because the rate has a poor correlation to the rates people actually pay for borrowing.
Until LIBOR eases , tinkering with the BoE rate will not have a big impact for many.
But it does get headlines. And it also brings the debate back about how the banks are not passing the rate on to borrowers and how the Gov are going to " have strong words with the banks" to " help struggling families" and all that b
ks...I welcome a reduction of the BoE rate however. The only financially prudent decision I made in the last 18 months was to get a BoE tracker mortgage..
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