Falling interest - financial indicator
Impact on charities of base rate cut by Bank of England
The bank of England has cut base rates by 1.5 per cent to 3 per cent , the biggest single cut in rates in 53 years. The reduction was justified because of an anticipated severe contraction in economic activity as the cyclical downturn is exacerbated by the banking crisis of September. Although the cut is dramatic – three times larger than any previous cut made by the MPC – it will not be the end of the cycle. Investment markets are discounting rates of 2 per cent by April. At the moment shortages of liquidity in the banking system have kept money market rates high and thereby prevented the full weight of the reductions hitting charity income but these shortages will ease in the next few months and the rates available to depositors will fall as a result.
Author: John Kelly
John Kelly is head of client investment at CCLA.
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