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May 23rd, 2012 
FAKE NEWS for the Zionist agenda - Christine Lagarde has said that the move will be good for UK homeowners and businesses
- A zero rate would be the first in the Bank of England’s 300-year history
By
James Chapman and Alex Brummer
06:11 EST, 22 May 2012
|
19:05 EST, 22 May 2012
Tough: Christine Lagarde has told the Bank of England to cut the record rate even lower to help Britain’s ailing economy
THE head of the world’s economic watchdog yesterday delivered an extraordinary call for the Bank of England to cut interest rates even further as British households were warned the income squeeze will last for another 18 months.
Christine Lagarde, of the International Monetary Fund, gave a strong endorsement of the Government’s deficit cutting plan – but suggested that if growth failed to pick up, temporary cuts in VAT or National Insurance should be considered.
Mrs Lagarde said the Bank of England should ‘reassess the efficacy’ of cutting rates below the current record low of 0.5 per cent to reduce the cost of borrowing for businesses and homeowners.
Labour insisted the IMF report showed Britain needed to come up with a ‘plan B’ to kickstart growth and stop the economy sliding further into recession.
But Chancellor George Osborne said the study backed his decision to take tough measures in 2010 to start slashing back the deficit inherited by the Coalition.
Mrs Lagarde’s intervention raises the prospect of the first zero per cent interest rate since the Bank of England was founded in 1694.
Japan cut rates to zero in the 1990s when it suffered a decade-long depression. But because the banks were so focused on reducing bad assets, they were not interested in handing out more loans and the plan did little to speed up growth.
Mrs Lagarde also suggested that the Bank considers a fresh round of money printing – so-called ‘quantitative easing’ – to stimulate growth.
Both measures would be grim news for savers, who have already been hit hard by low interest rates and earlier rounds of QE, which have helped drive the value of pension annuities to rock bottom levels.
The Office for Economic Co-operation and Development, meanwhile, warned that consumer prices will rise faster than disposable incomes both this year and next, meaning another year-and-a-half in which families can expect to be worse off in real terms.
Pressure: The Bank of England has held interest rates at 0.5% for several years but is being asked to go further
The IMF boss, in London to deliver her annual assessment of the UK economy, delighted Mr Osborne by backing the Coalition’s deficit reduction measures.
She said that when she looked back to the last election in May 2010, she ‘shivered’ to imagine what would have happened to the British economy without the austerity programme. ‘She later told ITV News that the Government had cut the deficit from 11 per cent of national income to 8 per cent now.
‘You have to compare that against other countries which experienced severe deficit numbers, did not take action right away and are now facing very, very stressful financing terms that is putting their situation in jeopardy,’ she said.
Happy: Chancellor George Osborne says the IMF report is backing the Coalition’s economic strategy
However, in its annual assessment of the UK’s economic record, the IMF said the Treasury should be ready to consider making temporary tax cuts to kickstart the economy if ‘recovery fails to take off’.
One possibility would be a temporary cut in VAT, which was raised to 20 per cent from 17.5 per cent in the Chancellor’s first budget.
Such a move would be a political disaster for Mr Osborne, since it is precisely what Labour has been calling for since the economy began to stutter again in the final months of last year.
An alternative would be for the Government to offer a temporary cut in National Insurance – raised by Labour before it left office – as a means of boosting business and jobs.
The IMF noted that the economy remains ‘flat’ and warned that the weak recovery may be ‘more protracted than previously anticipated’.
Mrs Lagarde backed a suggestion by David Cameron that the Government should consider using its hard-won credibility on the international money markets, which means Britain is able to borrow at record lows, to do more to underwrite infrastructure and housing projects and loans to small businesses.
The IMF also suggested there was scope for the Government to boost growth through higher infrastructure spending, which could be funded by imposing further public sector wage restraint or reforming property taxes.
The Chancellor said: ‘The IMF couldn’t be clearer. Britain has to deal with its debts and the Government’s fiscal policy is the appropriate one.’
Ed Balls, the Shadow Chancellor, insisted a plan B was required. He added: ‘If we fail to do so, and we see years of slow growth and high unemployment being entrenched.’
The OECD left its 2012 growth forecast unchanged at 0.5 per cent, but suggested another small decline in real incomes would be seen this year and next.
Households have already suffered the sharpest fall in living standards since the 1920s.
The Prime Minister will today warn EU leaders that Europe will be plunged into recession unless action is taken to prevent Greece falling out of the single currency.
At an emergency summit on the eurozone crisis, Mr Cameron is expected to step up pressure on German Chancellor Angela Merkel to allow the European Central Bank to issue ‘eurobonds’ – which would effectively see Germany underwrite the debt of stricken countries such as Greece.
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Interestingly the banks do not lend to one another at these ludicrously low rates as they know that each of them is wallowing in the toxic debt of penniless European governments. In other words it is like a house of cards, when the first one falls the whole lot comes down. Encouraged by governments’ proclamations of historically low rates the markets all seek to pull the wool over our eyes with our own regulators being the worst offenders when allowing the banks to pay depositors such low rates when said banks wouldn’t dream at lending to one another at the same rate. In other words, as per unusual, it is the savers who are being used to
prop up the banks and to fund their ludicrous salaries. One only has to look at
Facebook to see how bad financial markets and their practitioners have become!
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Knock it down to 0% now! I will save another £80 a month on my mortgage!
I never £80 a month on my savings even when rates were good!
If you have savings, you might as well either invest into your mortgage or put it under your mattress.
We need tax cuts, vat reduction and banks to start lending, we need to encourage growth and stop hammering the taxes up.
The torts are clueless!
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If she thinks building more houses is the answer i would suggest referring the matter to Ireland or Spain.Competion and lowering the value of the Euro is a more appropriate response and for Europe to get off its butt and start competing with Asia were another 5 1/2 billion people live or has Europe just being so indulgent with itself that it has taken its eye off the rest of the world.
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The Base Rate is a bit of a red herring, especially in these unique times. It is a means for the B of E to control money supply. It is effectively the MINIMUM overnight overdraft rate banks pay on their settlements accounts at the B of E (and there are “overdaft” limits and collateral has to be posted at the B of E to cover the “loan”).. If they is too much money in the system, the Base Rate is increased to discourage the banks from lending and going “overdrawn”. Too little money in this system and the opposite applies. In normal times, after a period of around a year, business lending and mortgage rates and saving rates “catch up ” with the Base Rate, but these are far from normal times.
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The late and former Bank of England governor, “Steady” Eddie George must be revolving in his grave.
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In all honesty…..Would anyone now be daft enough to save any money and get little interest on their savings so come retirement you are given the two fingered salute because you have savings and the state will not help you…..Spend spend spend….Enjoy your money now, besides the benefit of providing employment by spending creating more jobs, the advantage that when you decide to pack in work the state will look after you.
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Lagarde should keep her mouth shut and her nose out of British affairs. She is another phoney so called ‘economic expert’. Just like the EU idiots she has not got a clue. The only ones to benefit form 0% interest rates would be the banks because they would not pass it on. Every saver should withdraw their cash from the banks and watch the banks squirm
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Its a bit like the cliche stock broker shouting ‘buy, buy, buy, no, sell, sell, sell’. Only now its the economists shouting ‘save, save, save, no, spend, spend, soend’. You have to laugh really don’t you? It amazes me how quickly all these top western politicians shout the same message pretty much. Won’t be long before Germany starts singing from the same hymn sheet.
Now this should conveniently coincide with a general election. By the time they make these changes in the uk it will most likely be next year or announcements made soon…
If Greece stays in the Euro then not much has changed so until then insisting now on a complete opposite economic policy is ludicrous.
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0% interest would be disastrous. History has shown that inflation quickly takes hold when interest rates are rock bottom, so savers lose out on all fronts. Furthermore, people with mortgages will be impoverished once the economy picks up and interest rates shoot up beyond belief!
– John Fraser, South Shields, 22/5/2012 23:50 A base rate of 0.5% has hardly unleashed a tsunami of consumer-led inflation. The recent increases in inflation were a result of increased commodity prices and tax increases, not people spending like there’s no tomorrow.
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It’s not another interest rate cut needed – it’s enforcement of the banks to TRACK that rate with their loan products!
As it stands, the Bank of England could cut rates to 0.1% and all the high street banks promptly raise their SVRs to anything they like, raking even more out of the rate differential.
Stiff regulation of the banks would do a whole lot more than attempting to manipulate the market at taxpayer expense – which is all another base rate cut will end up doing.
Inflation is related to QE in the hands of Banks, rather than any other known source, since imports are now starting to fall in price, the pound has NOT collapsed like everyone thought it would, and wage deflation is already some years old by this point!
The biggest danger now is a deflationary crash of the entire economy from too much wealth in the hands of too few, about to be lost to the far east.
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