I disagree on the panic front. Interest rates were way too high for way too long because the BoE, like the ECB, and like many punters, were thrown a headfake by the commodity-led inflation spike, which was targeted rather than the underlying economic weakness. I think the US easing cycle provided a large liquidity boost which found its way into commodity prices, but the Fed in the US were aware of the economic challenge brewing. I ama amzed that the UK economy was eprceived as healthy while personal bankruptcies were going through the roof before most people had heard of subprime.Surprised wrote:In a way this is bad news. The BoE have seen no impact so far of rate cuts and the huge amount of money pumped into the markets and the economy by the government.
This cut looks like total panic as they seem to be trying to stave off a devastating recession in 2009 which will take years to recover from.
It will not work sadly.
Interest rates needed to come down quickly to reflect the scale of economic weakness. Rate cuts are not the only thing though - the methods the US are employing eg buying mortgage securities are the key to easing the current crisis.
