Interest rates are at an all-time low, but may not stay that way for too long

March 30th, 2009 by admin | Filed under Daily News, Recession, UK Bank Accounts, UK Banks, UK Credit cards.

As the battle against the credit crunch continues unabated, one of the key tools that the Bank of England have called into play in what seems like a vain effort to keep the economy moving may well disappear. According to the one of the Bank’ chief economists, Mr. Spencer Dale is very possible that the UK treasury will request that the banks begin to push up interest rates as a hedge against inflation.

According to Mr. Dale, the Bank will do all in its power to maintain their intention to have inflation down to an annual rate of 2% by April of this year. The bank seemed to be well on track till the figures for February were released last week, showing that inflation had risen to over the 3% mark, instead of falling, largely due to rising costs of food.

Mr. Dale also suggested that further action may be required to be taken by UK policymakers to keep inflation in check, and what has been implemented so far may take longer to cause the desired effect than initially projected.

Also on Friday, Chancellor Alistair Darling called for the banks to implement a fundamental shake-up staff in order to restore confidence in the industry. He insisted that one of the key areas requiring attention was how the banks reacted to their customers and not only that, to their staff, especially those at the middle level.

“Banks, and in particular their boards, need to recognise that their duty to shareholders is best fulfilled by acting in the interests of their customers and — not only some — but all of their employees,” Darling was quoted as saying

“But in order to regain the trust of the public, we need change that extends beyond the boardroom.” He continued.

His message was one that said as well as cleaning up their balance sheets the major UK banks had also make change in their trading culture. Digging in for the long haul, Darling also pointed out that it looks increasingly likely that the government will continue to hold a significant stake in the domestic banking system for the foreseeable future.

In the markets, shares in Barclays Bank shot up by 18%, their highest in more than two months, as the bank announced that they had been given a clean bill of health by the Financial Services Authority (FSA)

Barclays confirmed that, following a series of discussions with the FSA, it had been informed that their capital position and resources are expected to meet the capital requirements which the FSA published on 19 January and continue to do so.

One of the major banking groups who have consistently managed to survive without the need for public financial support, seem capable of doing so in the future, especially when they are about to announce the successful sale of their iShares asset management business which will bring them as further £4.5billion for their war chest, in addition to the close to £7billion raised last year.

In February Barclays posted better than expected profits for 2008. The £6.1bn, 14% down on 2007 was a bonanza when compared to the results of their competition, many of whom are now in Government hands.

On FTSE Friday stocks slumped slowly backwards with the FTSE100 closing down 0.67% (26 points to 3,898.85). The FTSE250 did about the same closing down 0.48% (30.62 points at 6351.52

Sterling continued to weaken against the increasingly strong dollar whilst rising slightly against the Euro, and holding its own against the Japanese Yen and the Swiss Franc:

Pound/US dollar 1.4316

Pound/Euro 1.0772

Pound/Japanese Yen 140.09

Pound/Swiss Franc 1.6375

Wall Street shares took a tumble on Friday spoiling a week of steady increases.

The Dow Jones Average dropped 148.38.to close at 7776.18. NASDAQ also fell 41.8 points to 1545.20