The Bank of England’s Monetary Policy Committee has announced it is maintaining interest rates at 5.75 per cent.
John Charcol senior technical manager Ray Boulger says rates should have been cut today. He says the MPC’s decision fails to look beyond the probable short-term increase in the CPI back above the target level of 2 per cent, to the dangers the global economy faces.
He says: “This is in the light of the increasingly worrying news which continues with relentless regularity to seep out from the banking community of ever more losses on their sub prime mortgage lending.
“A cut of 0.25 per cent today would at least have pushed three month Libor back down to about 6 per cent. It would also have started to redress the Bank of England’s policy mistakes, as outlined in last month’s Financial Stability Report, in dealing with the credit crunch.”
According to Boulger the problems in the credit markets are going from very bad to worse as increasingly dire news emanating from the sub-prime mortgage mess continues to surface. He says the MPC’s failure to cut rates means today’s opportunity to mitigate the potentially serious problems building up in the banking system has been lost.