News from British and Canadian Conservatives

Thursday, May 10, 2007

Interest rates hit 5.5%

The Bank of England Monetary Policy Committee has voted to increase interest rates once again today. The increase takes rates up to 5.5% and came as no surprise, following recent figures which have shown inflation spiralling out of control. The Governor of the Bank of England, Mervyn King, was forced to write to the Chancellor of the Exchequer to explain why CPI inflation had breached the 3% mark, more than 1% above the official 2% target. Meanwhile, RPI, which more accurately reflects the cost of living in the UK, now stands at more than 4%, also its highest level in years.

So far, the increases in interest rates don't seem to have dampened the housing market very much. However, the high level of debts which have been built up by many individuals will mean that the increase in interest rates will hurt and could cause personal problems. The high level of private debts has largely kept the economy afloat for the past few years could, ultimately, bring it all crashing down as the boom of cheap imports from China and the far east dry up.

On a more personal level, the rise is good news for me. As a non-home owner I am not lumbered with a mortgage or other debts, and my savings accounts will enjoy the extra 0.25% interest, assuming that the rises are passed on by the bank!

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