BBR held at 0.5% - but what next ? 04.02.2010

Author: David Whittaker Posted on: 19 February 2010

A Reuters Poll of 53 economics units (including the main banks) in January disclosed a wide range of views on where BBR will be at year end - RBS - 0.5%, LBG - 0.5%, BCL - 1.5% and HSBC - 2%. The median result was 1% but the median for the end of 2011 was 2.5% so inflation in 2011 was recognised as a challenge but then SWAP rates were generally higher.

Since then confidence about recovery has wained and SWAP rates have trended down to their lowest since the start of the credit crunch. Across the pond the Fed has made it clear that they will hold rates doen for a sustained period post the first signs of recovery and here economists are muttering that whilst cuts in governement spend, especially bureaucaracy and fringe projects, are needed, too much panic cutting may not be such a good idea.

QE is haletd for the time bieng - last monies due out in March - and it would be a sign of greater problems if new amounts were released in Q2.

The upshot of this is that confidence remains fragile and that lending margins may ease slightly if lenders fail to achieve new lending targets on the margins they have benn bale to charge over the past 9 or 12 months.