How long will the Bank of England keep the bank rate at 0.5% given inflation is at 3.3% and the target is 2.0%?
SimplyFinance Answers is a great place to start your research, but it is not a substitute for personalised, professional
advice. Please review our Terms of Use or Sign Up to ask a question or comment on an existing question. If you would
like to speak to an expert directly, use our Adviser Search to find an adviser in your area and contact them directly through SimplyFinance.
I'm debating if I should wait a few months before finalising my savings plan.
poshjosh
1 year ago
Expert Financial Adviser Answer
Dr David Carter FPFS
answered 1 year ago
Well now, a lot of people would like to know the answer to that question! There is still a view that what are known as the 'leading indicators' of inflation still point to a lessening in inflation but, as I am sure you know, the Bank of England has predicted this lessening for some time, and it hasn't happened yet.
I think that most people share the view that bank rates will remain low for some time to come. With unemployment increasing, house prices insecure and the 'recovery' at best uncertain, there are many factors other than inflation that will give those who want to raise base rate food for thought. If there are rises on the horizon, I believe that those rises are likely to be modest, and slow - but of course I could be very wrong.
It is wise not to defer savings for too long, because you never get back lost time. And it is also wise not to take too much heed of the short-term, nor to try to spot the 'right time' to make an investment decision. Rather, develop your plans with sufficient flexibility to meet changing conditions; if you think that conditions will change, avoid tying yourself into a product that will penalise you (by, for example, loss of interest) if you choose to go elsewhere.
report abuse
I think that most people share the view that bank rates will remain low for some time to come. With unemployment increasing, house prices insecure and the 'recovery' at best uncertain, there are many factors other than inflation that will give those who want to raise base rate food for thought. If there are rises on the horizon, I believe that those rises are likely to be modest, and slow - but of course I could be very wrong.
It is wise not to defer savings for too long, because you never get back lost time. And it is also wise not to take too much heed of the short-term, nor to try to spot the 'right time' to make an investment decision. Rather, develop your plans with sufficient flexibility to meet changing conditions; if you think that conditions will change, avoid tying yourself into a product that will penalise you (by, for example, loss of interest) if you choose to go elsewhere.
Expert Financial Adviser Answer
Darren Smith
answered 1 year ago
I generally agree with David.
In terms of cash savings you shouldnt delay getting something in place as the risk of inaction is the inability to rely on that emergency fund later or the inability to pay for that planned item or event (or having to pay more by using a loan or overdraft).
in terms of long term investment, your key tool is actually "time in the market" and not "timing the market". the longer you have time in the market the better and if you are looking at investing regularly then there is never a bad time. if you are looking to invest a lump sum you can only ever answer the question of when to invest after the date has already passed - you really need to consider are you looking for a longterm investment or simply to speculate on current market conditions? these are completely different things.
report abuse
In terms of cash savings you shouldnt delay getting something in place as the risk of inaction is the inability to rely on that emergency fund later or the inability to pay for that planned item or event (or having to pay more by using a loan or overdraft).
in terms of long term investment, your key tool is actually "time in the market" and not "timing the market". the longer you have time in the market the better and if you are looking at investing regularly then there is never a bad time. if you are looking to invest a lump sum you can only ever answer the question of when to invest after the date has already passed - you really need to consider are you looking for a longterm investment or simply to speculate on current market conditions? these are completely different things.
Expert Financial Adviser Answer
Tim Warner
answered 1 year ago
I would agree with both David and Darren, and I too don't think we will see any dramatic changes any time soon.
Another point to consider is the inflation figures this year have been skewed by the VAT rate reverting from 15% to 17.5% and without this rise we would be a lot closer to the target 2.0% so I don't believe that raising rates would have made a massive difference.
We will have the same effect next year when VAT rises again to 20% so, again, I don't belive that raising rates would neccessarily reduce inflation.
Personally I feel that any rises in the rate would have a much more detrimental effect on the economy than any benefits it could bring, but as always this is my own personal opinion and I have no greater insight into the inner workings of the MPC than anyone else.
Finally I would echo the above sentiments that to delay action because of a possible event, which may not happen in 2011 or even 2012, would be a much worse decision than possibly not making any plans at all because you just want to wait and see what happens in the future. Before you know it the future has been and gone, and you may have missed out.
report abuse
Another point to consider is the inflation figures this year have been skewed by the VAT rate reverting from 15% to 17.5% and without this rise we would be a lot closer to the target 2.0% so I don't believe that raising rates would have made a massive difference.
We will have the same effect next year when VAT rises again to 20% so, again, I don't belive that raising rates would neccessarily reduce inflation.
Personally I feel that any rises in the rate would have a much more detrimental effect on the economy than any benefits it could bring, but as always this is my own personal opinion and I have no greater insight into the inner workings of the MPC than anyone else.
Finally I would echo the above sentiments that to delay action because of a possible event, which may not happen in 2011 or even 2012, would be a much worse decision than possibly not making any plans at all because you just want to wait and see what happens in the future. Before you know it the future has been and gone, and you may have missed out.
arthurwang888
answered 1 year ago
In an interview with The Daily Telegraph, Paul Fisher, the Bank of England's executive director, said policymakers goal is to get interest rates back to about 5pc, representing a tenfold increase from current rates. The timing and speed of the increase would be dependent on the strength of the economy.
For a full transcript see - http://www.telegraph.co.uk/finance/economics/8219300/Paul-Fisher-interview-the-full-transcript.html
report abuse
For a full transcript see - http://www.telegraph.co.uk/finance/economics/8219300/Paul-Fisher-interview-the-full-transcript.html
