A wake-up call on base rates

Article Abstract:

UK interest rates were raised by 0.25% in early Nov 1996. This has led to uncertainty in UK financial markets and has led to increased speculation over what will occur in international markets. Consumption is seen as too high for inflation goals, and further rises may be needed to curb consumption. Interest rate levels also depend on fiscal policy and the strength of pound sterling. A higher value for the pound means there is less pressure to raise interest rates. The impact on share prices will depend on how far rates rise.

Economic policy

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UK base rates: base motives?

Article Abstract:

UK interest rates should be raised according to Eddie George, governor of the Bank of England. The government has left rates unchanged, and there are economic arguments for leaving rates stable since inflation is subdued. It is by no means certain that rates will not be raised prior to an election, though rates tend to be lowered rather than raised when an election is due. The government could argue that a rate rise shows commitment to controlling inflation while a drop in rates could be seen as a move to purchase victory.

Economic aspects

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