Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB
Silver's Relationship with Gold Reaching Historical Extremes - 16th Sep 18
Emerging Markets to Follow and Those to Avoid - 16th Sep 18
Investing - Look at the Facts to Find the Truth - 16th Sep 18
Gold Stocks Forced Capitulation - 15th Sep 18
Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - 15th Sep 18
Trading The Global Future - Bad Consequences - 15th Sep 18
Central Banks Have Gone Rogue, Putting Us All at Risk - 15th Sep 18
Gold Price Seasonal Trend Analysis - 14th Sep 18
Growing Number of Small Businesses Opening – and Closing – In the UK - 14th Sep 18
Gold Price Trend Analysis - Video - 14th Sep 18
Esports Is Exploding—Here’s 3 Best Stocks to Profit From - 13th Sep 18
The Four Steel Men Behind Trump’s Trade War - 13th Sep 18
How Trump Tariffs Could Double America’s Trade Losses - 13th Sep 18
Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - 13th Sep 18
Trading Cryptocurrencies: To Win, You Must Know Where You're Wrong - 13th Sep 18
Gold, Silver, and USD Index - Three Important “Nothings” - 13th Sep 18
Precious Metals Sector On a Long-term SELL Signal - 13th Sep 18
Does Gambling Regulation Work - A Case Study - 13th Sep 18
The Ritual Burial of the US Constitution - 12th Sep 18
Stock Market Final Probe Higher ... Then the PANIC! - 12th Sep 18
Gold Nuggets And Silver Bullets - 12th Sep 18
Bitcoin Trading - SEC Strikes Again - 12th Sep 18
Gold Price Trend Analysis - 11th Sep 18
USD/JPY - Profitable Opportunity Just Ahead of the Bulls? - 11th Sep 18
China Extends its Stocks Bear Market - 11th Sep 18
Best Car Jump Starter 2018 Review - Oittm 1500A Peak Current Battery Booster - 11th Sep 18
Index Put/Call Ratio spiked. What this Means for the Stock Market - 11th Sep 18
ALERT: Gold-to-Silver Ratio Spikes to Highest Level in 27 Years! - 11th Sep 18
Stock Market Trend Forecast Update - 11th Sep 18
Transportation Index Leads Stock Market Higher - 11th Sep 18
What Personality Traits Do You Need to Be a Successful Trader? - 11th Sep 18

Market Oracle FREE Newsletter

Trading Any Market

UK Interest Rate Cut to New All Time Low of 1.5%

Interest-Rates / UK Interest Rates Jan 08, 2009 - 10:08 PM GMT

By: Nadeem_Walayat

Interest-Rates Best Financial Markets Analysis ArticleThe Bank of England cut UK interest rates earlier today by 0.5% to 1.5%, the lowest that the base rate has been in the BoE's 315 year history. The series of rate cuts are a belated panic response to the UK economy plunging over the edge of a cliff that looks set to endure GDP contraction of 3% this year which is worse than any 12 month period since World War 2. Sterling rallied from near record lows against the Euro buoyed by a less than expected cut as many market commentators had expected rates to be cut by 1% today.


The interest rate cut of 0.5% for January is inline with my forecast for interest rates to target a fall to 1% by mid 2009 as the above graph illustrates. However given the deteriorating state of the UK economy there is a risk that rates could overshoot to the downside during mid 2009 by falling below 1%. As the credit markets have frozen the real economic rate has become far less responsive to base rate cuts, therefore the latest cut is expected to make very little difference to the severity of the recession, thus the buzz word for 2009 is "Quantative Easing" which basically means printing money, the consequences of which will be much higher inflation as we come out of economic contraction.

I have avoided referring to the Bank of England's accompanying statement due to the fact that it is basically meaningless drivel that seeks to put the blame of failure to regulate the banking sector and manage UK monetary policy competently onto the backs of "global forces". Unfortunately the government has proved just as incompetent in its handling of the crisis, which includes the £20 billion or so flushed down the toilet in the form of the 2.5% cut in VAT that has had NO EFFECT on the high street. Not to mention the £600 billion of liabilities of the banking sector which rivals the official public sector debt of £600 billion and hence contributed to sterling's recent 30% crash.

The UK economy is heading for real deflation as the UK inflation forecast for 2009 concluded, with the RPI measure is expected to go negative and target -1.2% by July 2009.

Deflation is already evident in the high street as the debt fueled long consumer boom has come to an end and claims major high street names each week, with last of Woolworth stores having closed earlier this week.

UK house prices continued to crash lower, with the latest data from the Halifax showing average house prices falling by £4,400 in December. The house price data is inline (-0.5% deviation) with the recently updated house price forecast that covers the trend into 2012 that projects for a total drop from peak to trough of 38%, with a 16% drop in house prices targeted for 2009 to be followed by a sustained depression for several years thereafter as the below graph illustrates.

UK house price forecast

My next newsletter will cover analysis of the major investment trends for financial markets for 2009. To receive this on the date of publication subscribe to my always free newsletter.

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 150 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.

Attention Editors and Publishers! - You have permission to republish THIS article. Republished articles must include attribution to the author and links back to the http://www.marketoracle.co.uk . Please send an email to republish@marketoracle.co.uk, to include a link to the published article.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules