Anticipation of rate hike granulating faster

London(online-unsecured-loan.co.uk) Jun 13, 2008: Investors are assuming that the interest rates need to be raised from the current level of 5%. This rise is supposed to bring the inflationary pressure under control. Most of the giant investors had previously expected rates to fall to 4.5% by the end of 2007. But the U-turn from the Bank of England came as new figures showed that about 3,000 London home owners are already suffering from negative equity and also due to the increase in the share of NPA of the subsidiary banks.

Interest rates prevailing in the market suggest that investors now fear that at least two, and possibly even three, quarter-point base rate increases may happen in the near future. The interest rate has surged at their fastest pace since Black Wednesday in 1992 and the global credit crunch had a disastrous effect on it.

The investors are right up to a great extent in expecting the next move in interest rates to be up. But they have not yet grasped the likely consequences of the interest hike on the UK economy. The Bank of England has cut rates three times since December 2007 as the credit crunch has taken hold. However, it has been stopped in its tracks by the price of crude oil reaching $140/barrel.

Back To News