Despite the ongoing credit crunch, the fall in the housing market and the mounting debt crisis which many in the UK are now suffering, it seems that the Bank of England are not too keen to reduce interest rates.  Why?

The Bank of England have built their reputation on an independent cautious approach to financial management, often preferring to see problems play their way naturally through the system, rather than providing false support in the short term.  The Bank also have a duty to keep inflation under control, hence the reason why UK rates are at today’s level.

While there are many people who will disagree with the approach of the Bank, they continue to closely monitor the state of the UK financial market, and where needed they will act.  Many people forget that if the Bank were to rush in and reduce interest rates we may see the rebirth of inflation, and the untold problems which that can cause. 

The balancing act between managing the economy using the array of weapons to hand, and managing inflation, is often very difficult to bring together.  The Bank have shown in the past that they have the bottle and determination to “do the right thing” because if they were to pander to all of the various associations around the UK, can you imagine the confusing signals this would lead to?

Short term pain, long term gain – this very much sums up the approach of the Old Lady, and she has been around long enough to see it all!