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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

UK Interest Rate Being Kept Artificially Low For Bank Profiteering

Interest-Rates / UK Interest Rates Dec 27, 2009 - 12:03 AM GMT

By: Nadeem_Walayat

Interest-Rates

Best Financial Markets Analysis ArticleThis UK interest rate analysis represents the next in a series of analysis as part of my unfolding inflationary mega-trend scenario towards the formulation of 2010 forecasts for inflation, interest rates and economy. I aim to complete the whole scenario and implications of before the end of December which will be published as an ebook that I will make available for FREE. Ensure you are subscribed to my always free newsletter to get the latest analysis in your email box and check my most recent analysis on the probable inflation mega-trend at http://www.walayatstreet.com


UK Interest Rate Being Kept Artificially Low For Bank Profiteering

The UK interest rate forecast of early December 2008 for 2009 forecast that UK interest rates should decline to 1% (from 3%) by early 2009 and remain there into the second half of 2009. However following the cut to 0.5% in March 2009, the Bank of England has continued to pursue an artificial banking system by keeping interest rates at an extreme historic low of just 0.5% into the end of 2009 so as to flood the bankrupt banks with liquidity to enable them to rebuild their balance sheets by overcharging customers against the base interest rate and manipulated interbank market rate of 0.66% against rising real market interest rates which have been in a steady climb since March 2009 which increasingly means that the base interest rate has become irrelevant to the retail market place as explained in the article - Bailed Out Banks Not Lending, Sitting on Tax Payers Cash.

The artificial banking system means that the bill for low interest rates is being paid by Savers who along with all tax payers are being forced to pay for the bankster's crimes as tax payer bailed out banks such as HBOS pay a pittance on instant access savings accounts of as little as 0.1% against a requirement of 2.3% just to cover CPI inflation of 1.9% plus the 20% tax charged on interest.

Money is being sucked out of the pockets of savers and being deposited onto the balance sheet of bailed out banks that have no incentive to pay a decent rate of interest when they can borrow at 0.5% from the Bank of England and marginally higher from other UK banks. The artificial banking system is resulting in unprecedented huge profit margins for the banks as market interest rates charged to retail customers continue to rise regardless of the base rate being held at 0.5% well into 2010 which is inflationary in terms of rising mortgage and other debt interest costs as these rising costs will show up to varying degrees in the RPI and CPI inflation indices. I will cover the UK interest rate forecast for 2010 in-depth in the coming week.

UK Inflation Forecast 2009

Deflationary forces as a consequence of the the bursting of the asset bubbles has fulfilled the deflation forecast for 2009 as per the original analysis of December 2008 - UK CPI Inflation, RPI Deflation Forecast 2009 that forecast Deflation into Mid 2009 targeting RPI of -1.2% and CPI of +0.9% to be followed by an uptrend into year end back into RPI inflation of +0.9% and CPI of +1.6% as illustrated by the below graph.

To ensure you get the in-depth analysis and precise forecasts for 2010 and beyond in your email in-box ensure you are subscribed to my always free newsletter.

Source: http://www.marketoracle.co.uk/Article16079.html

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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