Friday, 11 June 2004


The Bank of England's Monetary Policy Committee raised interest rates yesterday. As I don't own a house, it doesn't affect me nor should I care about such an effect resulting from an alteration of monetary policy.

To be frank, I'm not entirely sure whether the state should even own the money supply or whether the government should alter interest rates at all. Even if it should, it amuses me that homeowners and savers should get 'annoyed' at higher or lower rates. Interest rates are SET for the benefit of sound macroeconomics; if inflation is too high then interest rates are raised. If GDP growth is slack, then interest rates are lowered. Whether such changes affect the housing market is secondary.

Houseowners now should be lucky that monetary policy for the past decade (before the advent of the New Labour government) has been stable. During the full Major parliament, interest rates averaged 4-6%, which is not much different to the record of New Labour, since the responsibility for monetary policy was transferred to the Bank of England.