Where are Short Term Interest Rates Going?
Just a few months ago, futures contracts showed that investors expected the Bank of England to raise rates to 6.00 percent by December. However, with the overnight lending rate currently at a six-year high of 5.75 percent, this is no longer the case as the traders are now betting that the central bank’s tightening cycle has come to end. On October 4th, the Bank of England left rates steady for the third consecutive month as policy makers weighed the issues of upside inflation risks against the potential of a worsening credit crunch. While the rate decision was widely expected, traders were actually waiting to see if the bank would issue a policy statement as they did in September, when they acknowledged the troubles in the financial markets but said that it was “too soon to tell how far the disruption…will impair the availability of credit to companies and households.” Instead, the Bank of England was mum on conditions in the financial markets, signaling that they have no plans to ad
