Whilst it may not be good news for savers, borrowers were given a boost this week after falls in money market rates indicated that low interest rates may be here to stay.
Swap rates at all time low
The minutes of July’s Bank of England MPC meeting were released this week showing that one member – Andrew Sentance – once again voted for an increase in interest rates. However, the minutes and the money market rates suggest that the Bank of England are unlikely to increase rates in the near future. If the economy continues to struggle, they may also revive their policy of ‘quantitative easing’ – pumping money into the economy by buying government bonds.
Tight credit conditions
“Lack of access to credit for smaller businesses is still a serious problem despite some reports that it has risen slightly in recent months. This keeps open the possibility that the Bank of England could yet revive quantitative easing. However, we believe that this will only happen if the economy shows serious signs of faltering over the coming months.”