Page 5 - ISQ UK_October 2017

OCTOBER 2017

And this is why knowing what you are investing in and why is absolutely
Date UK interest rates changed Base rate level
critical for the next few years, whether you are a bond or equity
4 August 2016 0.25% investor.
5 March 2009 0.50%
5 February 2009 1%
8 January 2009 1.50%
4 December 2008 2%
6 November 2008 3% KEY TAKEAWAYS:
8 October 2008 4.50%
10 April 2008 5% • The Bank of England last raised interest rates in
7 February 2008 5.25% 2007 but rumours are swirling of an imminent
increase
6 December 2007 5.50%
5 July 2007 5.75% • Current policy is extremely loose and fears from
10 May 2007 5.50% this year that the UK will enter a recession have
abated
Source: Bank of England
• The Federal Reserve indicate that any policy
tightening is extremely slow and will focus first on
major western central bank to slash interest rates and introduce a reversing the new stimulus added after the Brexit
quantitative easing stimulus programme in the aftermath of the vote
events in 2007 and 2008. As is often the case with economic policy,
the ‘first in, first out’ rule is very apparent. Famously, the Federal
Reserve raised interest rates after seven years of pause in December
2015, and since then there has been a further three small tweaks up.
Perhaps more insightfully is that the pause on the creation of new
central bank stimulus pre-dated any of these interest rate movements
and occurred in October 2014 (and actual balance sheet size reduction
is only starting this month). If the Bank of England does

The essential conclusion from all of this is that the speed of policy decide to move in upcoming
tightening is, by historical standards, desperately slow reflecting the months, the magnitude of the
ongoing challenges for most global economies. This broad profile is
highly likely to be replicated by the Bank of England: potentially a shift will be extremely minor:
minor tweak up in interest rates and a progressive end to new there are too many fears out
expansion of the quantitative easing balance sheet. If the Bank of
England does decide to move in upcoming months, the magnitude of there to do anything else
the shift will be extremely minor: there are too many fears out there
to do anything else.

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