BoE keeps UK interest rate held at historic low of 0.5%

BoE keeps UK interest rate held at historic low of 0.5%
(Source The Times)
The Bank of England paused for breath today in its battle to combat the economic slump, holding interest rates at 0.5 per cent and staying its hand over any other changes in its recession-fighting strategy of quantitative easing.
The Bank switched to a “wait and see” stance after a six-month long scramble to shore-up the economy with drastic interest rate cuts and, since last month, a radical move to jump-start growth by “printing money”.
The noon verdict (09 April)from the Bank’s Monetary Policy Committee confirmed City predictions that official interest rates would be left on hold at their present 315-year low of just 0.5 per cent.
Mervyn King, the Bank’s Governor, had made clear last month that he saw little scope for further cuts. The record of the Monetary Policy Committee's last meeting showed it was anxious that further rate cuts could backfire, deterring banks from lending and hitting savers.

The Bank had also been widely expected to order no change for the moment in its drastic “quantitative easing” plan to pump extra, newly-created money through the economy by buying up a range of assets from the financial markets.
The controversial move to buy assets worth a total of £75 billion over three months began only last month, and is less than a third complete, with the Bank having so far purchased some £26 billion of UK government bonds or gilts, and about £400 million of corporate bonds — company IOUs. Read Article...
http://business.timesonline.co.uk/tol/business/economics/article6065520.ece

From Bubble to Depression?

From Bubble to Depression?
(Source Wall Sreet Journal)
Bubbles have been frequent in economic history, and they occur in the laboratories of experimental economics under conditions which -- when first studied in the 1980s -- were considered so transparent that bubbles would not be observed.
We economists were wrong: Even when traders in an asset market know the value of the asset, bubbles form dependably. Bubbles can arise when some agents buy not on fundamental value, but on price trend or momentum. If momentum traders have more liquidity, they can sustain a bubble longer.
But what sparks bubbles? Why does one large asset bubble -- like our dot-com bubble -- do no damage to the financial system while another one leads to its collapse? Key characteristics of housing markets -- momentum trading, liquidity, price-tier movements, and high-margin purchases -- combine to provide a fairly complete, simple description of the housing bubble collapse, and how it engulfed the financial system and then the wider economy.
Read article and analysis...

http://online.wsj.com/article/SB123897612802791281.html

The danger of keeping rates at zero

The danger of keeping rates at zero
The Fed seems to think inflation is no longer a problem. But inflation may just be in hibernation and low rates for a long period of time could awaken the beast.


NEW YORK (CNNMoney.com) -- This is obviously a terrible time for the economy. For that reason, it made sense for the Federal Reserve to slash interest rates near zero last month.
But I'm starting to worry a bit that the Federal Reserve is willing to leave rates this low for too long and that this could spark inflation down the road.
In a speech in London Tuesday morning, Federal Reserve chairman Ben Bernanke defended the Fed's series of rate cuts since September 2007, saying that inflation was no longer a major concern. The Fed usually raises interest rates when it is worried about inflation.
"At this point, with global economic activity weak and commodity prices at low levels, we see little risk of inflation in the near term; indeed, we expect inflation to continue to moderate," he said. Read article...

LIBOR, other interest rate indexes

LIBOR, other interest rate indexes
The LIBOR is among the most common of benchmark interest rate indexes used to make adjustments to adjustable rate mortgages. This page also lists some other less-common indexes.

Interest rates (De Nederlandse Bank)
This page contains statistics on capital and money market rates. Statistical information on the wider subject of market interest rates is provided as time series, in the form of tables in MS Excel format. Individual time series on selected periods may be specified and downloaded. As a rule, annual, quarterly and monthly series begin in 1982. Daily series start in 1990.

Interest rate cuts expected before year end

November 3. The current interest rates.
This week the ECB and the Bank of England could cut rates. We expect each of them to cut rates by 50 basis points, ½%, it's a more or less symbolic gesture. It depends very much on the graveness of current economic citcumstances or how central bankers judge the situation, when they do a 1% or more rate cut it means trouble ahead.
FED's chairman Bernanke last week already said, he does not expect very much of further rate cuts, and he has to reckon with the new Obama team. If the economic and financial situation deteriorates further between now and the 16th of December we can expect an other 25 basis points cut from the FED.

Download PDF Beige Book December 3 (Summary of Commentary on Current Economic Conditions by Federal Reserve District)