Last week's discussions between Eddie George, governor of the Bank of England, and chancellor Kenneth Clarke, broug...
Last week's discussions between Eddie George, governor of the Bank of England, and chancellor Kenneth Clarke, brought no further easing of monetary policy. It came as no surprise that interest rates remained unchanged at 6.0% at Wednesday's session given that there were cuts at three of the last four monetary meetings. However, it is significant that many in the market now believe there will be no further downward moves in the current economic cycle.
A recent pick-up in interest rate sensitive sectors, including housing, auto sales, household goods and construction orders, suggest that the economy does not need any further monetary easing to boost growth. As a consequence the chancellor's window of opportunity for further rate cuts is closing fast. If Clarke does manage one further, politically motivated, rate cut the best time for this to be announced would be around the time of the local elections in May.
Meanwhile, the Halifax, the UK's largest mortgage lender, announced a cut in its savings rate at the end of last week. The move follows the announcement of a cut in home loans rates last month, and could spark a fresh round of mortgage wars in what has become an extremely competitive market.