Bank of England reduces interest rates to one percent, the lowest rate in history

February 6th, 2009 by admin | Filed under Daily News, Pensions, Recession, Saving, Stocks and shares, UK Bank Accounts, UK Banks, savings accounts.

In yet another attempt to get the UK economy moving forward, the Bank of England announced that they will be reducing interest rates by half of a percent to one percent, the lowest interest rate in the history of UK economics. The Banks have shown that they can go no lower with rate cuts with the current reduction in interest rates being the fifth since October 2008.

However, while industry and commerce are still not exactly chomping at the bit to borrow money even at these “give away” prices, the unfortunate few who still actually have some money on deposit are losing out on the interest they are receiving, yet have nowhere else to go to deposit funds and earn some interest. Even the good old days of autumn 2008 seem appealing when the bank rate was hovering around five per cent to where it is now, say many would be savers.

As far as borrowers, especially those with mortgages to pay, the good news about this recent interest rate cut is that the banks actually intend to pass this rate cut to their clients, and already many of them have been seen to do so, including Halifax Building Society, Nationwide, Barclays and Lloyds TSB.

In announcing the cut, a spokesman for the Bank of England hastened to point out that “although the transmission mechanism of monetary policy was impaired, the past cuts in Bank Rate would in due course nevertheless have a significant impact

To cast some further clouds over what should have been a happier occasion; a few items of negative financial news were announced yesterday. Firstly that the announcement that the UK economy contracted by 0.6% in the third quarter of 2008, and that unemployment has risen to 1.92 in the British Isles in the last quarter of the year.

Things made not be great in Great Britain but when compared to Iceland we are doing very well here indeed.

The one time highly successful Reyjavik based retail investor Baugur, is strong pressure from Icelandic bank Landsbanki, to sell some if not all its UK High Street retailing outfits..

Baugur, under its UK holding company BG Holding are fighting to prevent being put into administration by Landsbanki and have applied for protection from Landsbanki as well as other minor creditors.

Stakeholders in such UK institutes as the House of Fraser and Hamleys Toy Store, Baugar are reported to have debts of around one million pounds. If an interim agreement cannot be reached as well as a restricting plan instigated, the retail group could find themselves being placed in the hands of the liquidators as early as today.

On the FTSE, stocks were stable with Unilever, the world’s second-largest consumer-products company, announcing that they deemed it “inappropriate” to make forecasts for the next two years amid the global recession, offsetting a rally by banks. Unilever’s shares slumped 5.9 percent on that report

Both Lloyds Banking Group Plc, Britain’s biggest mortgage lender, and Royal Bank of Scotland Group Plc rose more than 5 percent on the back of the recent report stating that British house prices had raised rose 1.9 percent in January higher than all the forecasts.

Lloyds rose 5.7 percent to 100.6 pence. Royal Bank of Scotland Group Plc, the biggest U.K. bank controlled by the government, increased 5.8 percent to 22 pence. Barclays Plc gained 3.2 percent to 100 pence.

Publisher of the U.K.’s Yellow Pages phone directories Yell Group Plc saw their share value decline by five percent to 47.75 pence. The company anticipate a drop in revenue for the current quarter to be their largest ever as

The U.K.’s third-largest gas producer BG Group Plc advanced by ten percent (97 pence to 1,048) after reporting a 56 percent gain in fourth-quarter profit on higher prices for liquefied natural gas. The company also raised its full-year dividend by twenty percent.

Food service provider Compass Group Plc also showed an upswing gaining 4.2 percent (14.25 pence to 257.25) after announcing that their first-quarter operating profit forecast was way ahead of 208, due to “significant” contract wins in North America.

The FTSE 250 index rose by 0.56% or 35.67 points to 6,426.82
while the FTSE 100 rose by 0.54% or 23.03 points to 4,251.96 on a conservative days trading.

On the foreign exchange markets, Sterling rose slightly against the main currencies.

Pound/US dollar 1.41.4739

Pound/Euro 1.153

Pound/Japanese Yen 134.8

Pound/Swiss Franc 1.7272

Wall Street shares had not a bad day on Thursday’ trading

The Dow Jones Industrial Average rose 106.41 to close at 8036.7 while NASDAQ rose again, this time by 31.19 points to 1546.24

Vulnerable on Wall Street were financial stocks which fell among renewed fears about the bank’s stability. Investors are about whether government efforts to prop up banks will be harmful to shareholders.

Bank of America was the most notable among those whose stocks continued to tumble, both on Wednesday, as well as yesterday. Pressure on the stock grew because some mutual funds are prohibited from owning stocks that fall below $5, with the stock down fourteen percent on Thursday’s trading (65 cents to $4.05).