Your savings and the low interest rates
The savings market continues to suffer from low interest rates at present and there is an increasing divergence of opinion over which path the Bank of England will choose to follow in the coming months. While those who favoured a ‘Remain’ vote at the recent referendum highlight the falling sterling value and rising inflation as a long-term cause for concern, others in the ‘Leave’ camp highlight the positive inflationary effects (following deflationary pressures) and discounted price for foreign investment.
Should inflation creep too high, then interest rates may be moved upwards but this is largely dependent on the moves in real wage growth too. The consensus at present is a “Wait and See” approach dependent on what takes place in reality in the period post-Brexit
We have been in discussions with some of the deposit providers for their outlook following the June vote to leave the EU. It is worth passing on that some are expecting for the base rate to be reduced. They have explained that while the short-term data has shown economic growth, this has mainly been driven by a weak pound and rising inflation. Such short-term positives are expected given the currency fluctuations but the forecasts remain unchanged for the medium to long-term negative effects.
Ultimately, the real effects remain unknown and while it could be argued that there is no case for further quantitative easing, some banks are suggesting that there still remains a case to reduce the base rate to 0.10% . If it doesn’t take place soon, then they expect for the base rate to reach 0.10% by Q1 of 2017.
If you are concerned about your cash balances achieving little or no interest please contact a member of our Banking & Finance Team for an initial chat and we can look to put you in touch with one of our Cash Management experts.