BANK OF ENGLAND SHOCK THE MARKETS WITH AN UNEXPECTED 150 BASIS POINT CUT
BoE cut Interest Rates to 3% to stimulus the UK economy
The Bank of England made a shock one-and-a-half percentage point cut in UK interest rates to 3%. This is the lowest level since 1955. The year-long credit crunch has taken it’s toll on the economy and is becoming more apparent, with house prices tumbling, job losses mounting, a continuing decline in manufacturing and Inflation still at a 5.2%. Britain's economy shrank 0.5 percent in the third quarter and many experts do not expect a recovery until 2010. Main mortgage lenders have now started to respond to the government's demand that they should cut their mortgage lending rates.
Nationwide, HBOS, RBS/NatWest group and nationalised Northern Rock have all agreed to cut their main variable lending rates by the full 1.5%. Only a small minority has declined in cutting their rates and we hope to see them follow suit very soon.
ECB stick to their conservative nature and cut Interest Rates by 0.5%
The European Central Bank cut rates by 0.5% last Thursday bringing the total reduction in official rates in the Eurozone to 1% in the past month. There has been a change in it’s thinking on monetary policy since then, brought about by an abatement in inflationary pressures as oil prices collapse, the Eurozone economy falls into recession and worries about the deepening financial crisis. Jean-Claude Trichet did indicate that further easing is in the pipeline but the perception that the ECB is behind the times to other financial authorities is likely to leave the Euro on the back foot versus the dollar. Retail sales within the Eurozone fell by 0.2% since August, this reinforces Trichet’s comments of a pending rate cut from the ECB.
US jobless rate at 14-year high
U.S. employers cut payrolls by 240,000 in October, much more severely than expected. September registered the biggest monthly loss in jobs in nearly seven years, according to a government report on Friday that showed U.S. labor markets were sharply deteriorating. Even more strikingly, the department revised September's losses to 284,000 - the highest since November 2001 just after the September terror attacks - and also revised August losses higher to 127,000. Racing to assemble his new Democratic cabinet, President-elect Barack Obama met with economic advisers last Friday. His team has been in close contact with the Bush administration to pave the way for a smooth handover of power.
All the economy's woes - a housing collapse, mounting foreclosures, hard-to-get credit and financial market upheaval - will confront Mr Obama when he assumes office early next year - and the employment situation is likely to get worse
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