UK Interest Rate Cut
Wednesday 8th October
Tutor2u Economics
Monetary Policy - Base Rate of Interest for the UK
Percent
Percentage, since May 1997 base rates have been set by the Bank of England
7.5
7.5
7.0
7.0
6.5
6.5
6.0
6.0
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
97
98
99
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
Interest Rates and Confidence
5.75
5.75
5.50
5.50
5.25
5.25
5.00
5.00
4.75
4.75
4.50
4.50
4.25
4.25
4.00
4.00
Index
Percent
Base interest rates and consumer and business confidence indices
15
15
10
10
5
5
0
0
-5
-5
-10
-10
-15
-15
-20
-20
-25
-25
-30
-30
Jan Mar May
Jul
06
Sep Nov Jan Mar May
Jul
07
Sep Nov Jan
Mar May
Jul
08
Sep Nov
Policy Rates, Bank Rate
DG ECFIN, Business Surveys, Manufacturing Sector, Confidence indicator, SA
DG ECFIN, Consumer Surveys, Confidence indicator, SA
Source: Reuters EcoWin
Interest Rates for the Euro Zone, the UK and the USA
Per Cent
6.0
6.0
5.5
5.5
Bank of England Rates
Percent
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
3.0
3.0
2.5
Euro Zone Interest Rates
2.5
2.0
1.5
2.0
1.5
USA Interest Rates
1.0
1.0
0.5
0.5
0.0
Jan May Sep
03
0.0
Jan May Sep
04
Euro Zone Interest Rate
Jan May Sep
05
Jan May Sep Jan May Sep Jan May Sep
06
07
08
United States Interest Rate
United Kingdom Base Rate
Source: Reuters EcoWin
The Cost of Borrowing
Per cent, source: Bank of England
20.0
20.0
18.0
18.0
Overdrafts
Percent
Credit cards
16.0
16.0
14.0
14.0
12.0
12.0
10.0
10.0
8.0
8.0
Mortgage rates
6.0
6.0
4.0
4.0
Base Interest Rates (set by BoE)
2.0
2.0
0.0
0.0
Jan
May Sep
04
Jan
May Sep
05
Jan
May Sep
06
Jan
May Sep
07
Jan
May
08
Source: Bank of England
Trying to Stem the Credit Crunch
Percentage, since May 1997 base rates have been set by the Bank of England
7.00
7.00
6.75
6.75
6.50
6.50
Percent
6.25
6.25
London Interbank 3-Month Interest Rate
6.00
6.00
5.75
5.75
5.50
5.50
5.25
5.25
Bank of England Base Rate
5.00
5.00
4.75
4.75
4.50
4.50
4.25
4.25
4.00
4.00
3.75
3.75
3.50
3.50
3.25
3.25
3.00
3.00
Jan Mar May
Jul
06
Sep Nov Jan Mar May
Jul
07
Sep Nov Jan
Mar May
Jul
08
Sep Nov
Source: Bank of England
Number of loans approved for UK house purchase
Number of
Monthly figure, seasonally adjusted
140000
140000
130000
130000
120000
120000
110000
110000
100000
100000
90000
90000
80000
80000
70000
70000
60000
60000
50000
50000
40000
40000
30000
30000
01
02
03
04
05
06
07
08
Source: Council for Mortgage Lenders
Base Interest Rates and UK GDP Growth
Percentage, since May 1997 base rates have been set by the Bank of England
6.0
6.0
5.5
5.5
Percent
Base interest rates
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
Real GDP growth
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
Sterling and Base Interest Rates
Trade-weighted index value for sterling in the foreign exchange market, daily value
6.00
5.75
5.75
5.50
5.50
5.25
5.25
5.00
5.00
4.75
4.75
4.50
4.50
4.25
4.25
4.00
4.00
107.5
107.5
105.0
105.0
102.5
102.5
100.0
100.0
97.5
97.5
95.0
95.0
Percent
Index
6.00
Base Interest Rates
92.5
92.5
Sterling Exchange Rate Index (trade-weighted)
90.0
90.0
87.5
87.5
Jan
Mar
May
Jul
07
Sep
Nov
Jan
Mar
May
Jul
08
Sep
Nov
Source: Reuters EcoWin
Euro - Sterling Exchange Rate and Interest Rates
0.800
0.800
0.750
0.750
0.700
0.700
0.650
0.650
0.600
0.600
0.550
0.550
6.5
6.5
6.0
Pence per Euro1
Pence per Euro1
Value of one Euro, daily closing exchange rate, policy interest rates (%)
6.0
UK Interest Rates
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
3.0
3.0
2.5
2.5
Euro Zone Interest Rates
2.0
2.0
99
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
Euro - Sterling Exchange Rate and Interest Rates
0.800
0.800
0.750
0.750
0.700
0.700
0.650
0.650
0.600
0.600
0.550
0.550
6.5
6.5
6.0
Pence per Euro1
Pence per Euro1
Value of one Euro, daily closing exchange rate, policy interest rates (%)
6.0
UK Interest Rates
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
3.0
3.0
2.5
2.5
Euro Zone Interest Rates
2.0
2.0
99
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin