Interest rates held but more QE announced
The Bank of England keeps rates at 0.5% but is to pump an extra £50 billion into the economy.
The Bank of England has held interest rates at their record low of 0.5% but has announced a further £50 billion of quantitative easing (QE).
The QE spending over the next four months will involve the Bank buying up Government bonds (also known as gilts) from banks. This is designed to pump more money into the economy in a bid to kickstart spending and, in turn, growth.
This new raft of QE takes the total amount to £375 billion. The Bank is hoping that a combination of this and the funding for lending scheme announced in June will help dig the UK out of the current double dip recession.
Today’s announcement is bad news for annuity holders, as the Bank buying up the gilts decreases the yield. These yields are one of the factors used to set annuity rates.
Figures from retirement specialist MGM Advantage show that the average annuity income for a 65-year-old man with a £100,000 pension pot has fallen from £7,300 a year in March 2008 to £5,850 this March.
More on the economy
Fears of higher interest rates after banks downgraded
European Commission: Taxpayers to avoid bailing out banks in future
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Central bank buys Gov. bonds as opposed to those of private sector or other countries bonds (mind you, whose?). So, we have inflation after each QE. That just delays the inevitable. What are we waiting for; to go to the cash point one day and be unable to withdraw cash? Or one morning our bank is down due to a 'glitz' that is not correcting quickly. Take Ulster Bank, which is still struggling to get its electronic-payments systems up to date for 600,000 customers. Hundreds of workers, including HSE nurses, have yet to receive pay that was due to them on June 21. "The bank is promising to have most accounts updated by next Monday. Its chief executive, Jim Brown, said last week that Ulster was working on a plan to ensure that those who lost out all get payments to reflect the inconvenience suffered. The Central Bank has demanded that a "restitution plan" is put in place". At least that is good for the poor customers. Hyperinflation comes suddenly, without warning. Could be in a year or so; if the system lasts that long or tomorrow. Everything goes up and we lose the value of our savings. Shouldn't have long to wait now. My advice to self is only keep the necessary in the bank to pay bills and find somewhere else to invest any spare cash; like metals, but not EFT's. The manipulation should and can only last so long. Buy before September 2012.
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Kick-start? How come the previous 325bn failed to kick-start anything? Why should it this time? We are just running out of money. This will end in tears.
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Quantitative easing (QE), no matter how it is wrapped up, is nothing more than devaluation of the pound. The money "printed" will never be taken back out of the economy and will be indirectly lost from savers deposits as the value of the pound drops proportionately to cover the "magic wand" funds. The politicians and mandarins just cannot get it into their heads that the only way out is to divert from public spending into private spending by drastic surgery on the public sector, putting real earned money back into the economy and boosting Britain's productivity.
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11 July 2012