Pyramid Comment

This journal takes an alternative view on current affairs and other subjects. The approach is likely to be contentious and is arguably speculative. The content of any article is also a reminder of the status of those affairs at that date. All comments have been disabled. Any and all unsolicited or unauthorised links are absolutely disavowed.

Saturday, January 25, 2014

Bank of England Interest Rate and Lending

Two articles and two days apart. Not linked through reporting, but directly linked nevertheless. Unemployment is allegedly at its lowest for 5 years and the Bank of England (BoE) has indicated it will resist raising interest rates (23.01.2014). Neither will it lower them. Claims are made that the jobless has dropped by 167,000 in the 3 months to November 2013 (down to 2.32 millions). The second biggest fall on record. Unemployment is at a level of 7.1%. The BoE will consider an increase of the interest rate when it decreases to 7.0%.

  • Allegedly, the threshold may be reduced to 6.5%... and other factors taken into account (what other factors?   - DA).
With inflation is back to 2.0% (the Government target), the Monetary Policy Committee saw no immediate need to raise the bank rate, even if the 7.0% threshold was reached. As anticipated, the view is to leave any adjustment until "after the next general election in May".

This should be coupled to the revelation that the 'big six' banks handed out over £100bn in mortgage loans during 2013, the largest amount over the last 5 years, according to the British Bankers' Association. The Help to Buy initiative encourages first-time buyers to get onto the property ladder. It is predictable that this should be scaled back to increase the amount of borrowings required.

This would suggest that when more people have taken on greater debt, then is the time to raise interest levels. This supports growth which is (to a large extent) the growth of debt.