Following a turbulent time on the markets and the Americans effectively outlining that they will hold their rates for 2 years, it was little surprise that the Bank of England announced that the base rate would remain at 0.50% today. The economic data about the UK and other economies is looking pretty poor and whilst normally rates should be rising (to dampen inflationary pressures) they are “unable” to do so without potentially damaging growth.
The Federal Reserve committee members have been pushing for the Fed to produce more explicit information about longer-term interest rate plans. They made positive steps forward in this regard by agreeing that the target range for Fed rates is 0 – 0.25% until mid 2013.
There is a little bit of smoke and mirrors going on though. Rising inflation is good for debt as it reduces it in real terms. The concern about inflation seems to be evident in that National Savings (NS&I) withdrew their index-linked (inflation-linked) certificates, which suggests that a good deal should not be too good.