Bank of England Maintains Bank Rate at 5.25%
The Bank of England’s Committee yesterday voted to maintain the official Bank Rate to 5.25%. The committee who attended the monthly meeting, which was held yesterday, came to the conclusion that increasing food and energy prices was to be blamed for this.
Another reason for the Bank of England to come to this decision is the credit crunch crisis which started in the US when the Federal Reserve cut interest rates to 3% for the second time in nine days to prevent the US economy from going into turmoil. The Federal Reserve is hoping that this move will be of a good nature and will cushion the US economy from the worst effects of the credit crunch still to come.
After the effects of the credit crunch in the US, the toll has now spread over the Atlantic and has caused havoc in the UK and Europe too. Reports have found that consumers are spending less which is leading to a down fall in the economy leaving many businesses bankrupt or merely in a position where they cannot afford to pay their rents. The significant inflation risks and the slowing growth of the economy are at risk here. Where there has been a drop in the US market, the UK economy is just as bad with both countries facing turmoil should they not tread cautiously.
Nearly £175 billion has been lent to businesses in the commercial property market - UK; many analysts believe that the recent effects of the credit crunch will have no effect on the commercial property market and that many firms will just continue to buy new properties to add to their portfolios. While many other analysts believe that the office, retail and warehouse industry has cooled rapidly and they fear this could turn into a slump. They believe that this industry is coming to a juddering halt and that Britain is facing a commercial property crash which has not been seen since in the early 1990’s.
On the other side of the Atlantic in the US, the commercial property market is still an on going crisis in the global finance market. Economists in the US say tighter credit and the substantial reductions in new constructions is causing havoc with the unemployment sector across the state. The effects of the bailout on the commercial and real estate markets has slashed property values rapidly and as the impact of sales and income tax causes a threat in the economy, the whole nation seems to be going into recession.
Both the UK and the US have been hit severely by the credit crunch and it seems that both countries are having to pay the price for it.