Interest Rates Remain The Same, What Happens Next?

There is no doubt that the Bank of England and the government are trying measures to help ease the country out of the recession, but the measures seems to be making little impact, as unemployment reaches a new high, lending reducing and the amount of business closing continuing to rise.

With the rates so low, the BOE has had to look at the other things it can realistically introduce to help slow the slide. Quantitative easing has been instigated, which is basically purchasing assets such as government and corporate bonds to help increase the supply of money in the economy. It has also created more money to pump back into the country, with early reports indicating around £26 bn has so far been ploughed back into the countries finances.

We need to give these measures a few more months to see how effective they have been, but early indications would probably lead most to conclude they have had little or no effect, with unemployment expected to reach 3 million next year, which seems optimistic to say the least.

The CBI seems to think otherwise, saying that the early indications of the new measures are showing signs of slowing the decline.

John Cridland, CBI deputy director general, said: "It is too early to judge quite how quickly this will begin to affect the broader economy.

"But the first tentative signs of the impact on gilt yields, corporate spreads and commercial paper issue have been encouraging."

It is important to give these measures more time to have some effect, but those facing losing their jobs, houses and possibly everything they have ever worked for need action and need it far quicker than would appear possible. As we head into the Bank Holiday weekend, it will be interesting to see the impact on tourist attraction and leisure outlets such as pubs, restaurants and entertainment venues.

By Ian Spencer who blogs at discoverandinvest.com