How low with Euro Interest rates go?
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Do a search, this has been discussed a few times.
Indications are still being given that a further half per cent cut is likely in June, following the ECB cut due tomorrow. So far the cuts have occured 90% as predicted. I think I saw an interview that indicated 1% was likely to be the final base rate...but the situation is changing so rapidly who honestly knows anymore.
UptheDeise
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It will eventually go to zero has panic sets in. they shouldn't be lowering the rate at all. Lowered interest rates are the last thing we need.
Its exactly what i need! Offsets my pension levy and wages levy, and whatever they're gonna throw at me in April. TBH, if they went back to the previous levels i'd be handing the house keys back at this stage..
UptheDeise
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With a lower interest rates saving money in the banks will not be an option for many. The less cash a bank has the less credit they can offer to businesses. They go under unemployment goes up.
I'm afraid i've given up worrying about the bank's cash. All i care about is having enough money to put a roof over my kids' heads..
The Waterford school of economics - put interest rates up as inflation is going down and all this in a recessionary period. Take more money out of the economy so people have less to spend!
Interesting take on how the economy should handle the current crisis.
Was wondering. Martin Cullen for Minister of Finance then!
The Waterford school of economics - put interest rates up as inflation is going down and all this in a recessionary period. Take more money out of the economy so people have less to spend!
Interesting take on how the economy should handle the current crisis.
The idea of low interest rates is to stimulate borrowing by making the cost of credit cheap. It also reduced mortgage repayments which encourages spending and makes saving less attractive which encourages investment. That’s the way it normally works however since the banks have no cash to lend conventional stimuli may not work, that’s why governments are recapitalising the banks.
True but saying higher interest rates during the current problems means more savings which means that banks have more money to lend to business and will be good for our economy is bordering on insane!
UptheDeise
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What a ridiculous statement by yourself and cayne. The only way we can get this economy up and running is to allow for real credit to play its part. This credit can only come from people savings. Also lowering the interest rates will adversely affect those people who depend on the savings as a source of income - pensioners in particular.
I agree with your second point about pensioners and savings.
I am sorry but your theory about high interest rates during a recession complete and utter tripe. How can credit only come from people saving? If people are doing nothing but saving and making higher debt repayments, what do they have left to spend with those businesses that you want the banks to lend to? Banks have other sources of funding other than customer deposits. The problem with banks isn't funding. Its capital and customer deposits don't help on that score.
UptheDeise
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People's savings are used to seed capital for investments, No? People will also begin to rein in their spending as they receive less on the savings and investments.
Also, the last thing we need is too encourage people to be getting more credit for spendng. It is much wiser to get people to save and then use their savings for spending.
This is the root of the problem in the world economy, people are not spending, therefore reducing demand and costing thousands of jobs.
UptheDeise
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The problem was with cheap easy credit, hence a credit bubble. People have been over borrowing, over spending and over consuming. Now the bubble is deflating our flase economy is collapsing.
So we raise interest rates as a punishment or something?
I am sorry but I just can't see the logic to the argument. You say you want interest rates to be high so people will save more so banks will lend to business. And yet you seem to forget that high interest rates mean high business loan rates. Higher mortgage and credit card repayments by individuals means less spending (and saving) and therefore less consumer demand. Also bad for business but you seem to think this a good thing because we had a bubble. I agree that everyone from individuals to companies to banks need to deleverage but raising interest rates in the middle of the biggest recession in 80 years and the threat of deflation hanging in the air is not the way to go about it.