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How will interest rate changes affect you?

How will interest rate changes affect you?

The path of the Pound was split against its two principal trading partners yesterday. The GBPEUR has continued to see a steady ebb and flow as all eyes are on the Greek situation. Yesterday saw the GBP gain doggedly against the EUR and then to fall back again at a similar rate and close lower on the day. The GBPUSD saw a slow, one way appreciation until the US trading hours where, again, the GBP was the winner and continued to press higher vs the Dollar.

Well Alexis Tsipras, Greek Prime Minister, has managed to corral his party into an agreement to reforms that were imposed on the country as part of the funding package on offer. The risk of this not coming to pass is eroding. Slowly. There was still opposition to the reform proposition from inside Tsipras’ own party. However, when the overall cabinet is taken into consideration, this was passed fairly confidently at 230 votes for, in a total chamber of 300 voters. Now the hope is that the negotiations about the specific bailout deal can begin so that it can be wrapped up quickly.

With a number of central banks now mooting a discussion or perhaps hinting at rate rise agendas during the coming 12 months, much debate has been sparked among the Currency UK Ltd team. The factors we discussed when thinking about how we might vote, should we be a member of the Monetary Policy Committee for the UK, were both from a personal and an economic perspective.

Some talked about the effect on their mortgage rates after enjoying record low rates for so long, a move upwards really does make the interest rise a question of reassessing the household budget. Others talked about the pressure this increase in interest rates puts on the housing market and associated debt levels. These factors may force households to seek benefits to support themselves, seemingly at odds with the new UK budget we have received. Still others discussed the current 0% inflation levels and oil prices dominating the global and imported inflation to the UK, meaning that our control has been diluted. Furthermore, the current 2% inflation mandate for the committee perhaps is no longer relevant and needs to be reviewed.

There are plenty of factors of changes to this policy that will have impacts to people and businesses, have you thought about how this might affect you or your business? We would love to hear your thoughts.

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