Bank of England to assure Britons’ savers in its quarterly inflation report
The Bank of England’s quarterly inflation report, due to be published later this week, is set to reassure that savers in Britain have not been ‘abandoned’ following aggressive cuts in interest rates.
The Bank of England’s Governor, Mervyn King, will insist that rates will return to normal levels as soon as possible, by steering the economy out of recession.
Aggressive cuts have been made to the base rate since October, when rates stood at 5%. Last week, the Bank cut rates to 1% – the lowest level since the Bank was established over 300 years ago.
While interest rate cuts have been good news for borrowers, they have been bad news for savers after research by the Association of British Insurers (ABI) found that Britons are ‘disillusioned’ with saving.
The ABI found that nearly three quarters of UK consumers believe the benefits of saving have fallen over the last year.
The Bank’s inflation report will also coincide with the latest unemployment figures, with a rise of 90,000 in the claimant count last month expected – it will be the largest rise in the current recession.
Meanwhile, the report is also expected to bring with it a grim assessment for the UK economy.
Official figures produced at the end of January confirmed that the UK has entered recession after Gross Domestic Product fell by 1.5% in the fourth quarter of last year, following a 0.6% contraction in the three months prior to that.
Last month, the International Monetary Fund said the UK will see its economy contract by 2.8% this year – the worst of any western country.
Finally, economists will be examining the report for signs that ‘quantitative easing‘ could be implemented, whereby the Treasury would inject funds into the financial system and ease pressure on banks by giving them extra capital.
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