Downing Street Says » Interest Rates

Asked about interest rates being passed on to customers, the PMS replied that when official rates were cut consumers would expect to see the benefit, but at the moment we were seeing difficulties in the inter-bank market and that was what we were trying to address. By addressing the root cause of the problem, the inter-bank market, we would be able to get money flowing around the system in a way that would ultimately benefit households and consumers. The Prime Minister was very clear that we were taking action in order to ensure that mortgage holders and small businesses in particular did benefit.

Asked if the Prime Minister was expecting coordinated interest rate cuts to come out of the November 15th meeting, the PMS replied that the Prime Minister s view on this, as he said yesterday in his interview, was that decisions on interest rates were decisions taken by independent central banks.

Put that the taxpayer now had a direct interest in some of the banks lending decisions and therefore it was not strictly a commercial decision anymore, the PMS replied that there were specific commitments that had been entered into by the banks who were beneficiaries of the Government s recapitalisation programme, and those were the commitments that the banks entered into at the time of the recapitalisation programme, and we expected those commitments to be met. We were trying to improve the workings of the money market so that we could get more liquidity into the market and get the wholesale money market working better. That ultimately should benefit consumers.

Asked what the Prime Minister thought should happen to banks if they refused to honour the commitments they had made, the PMS replied that we were not going to get in hypotheticals. We were in regular contact and dialogue with the banks as people would expect. Peter Mandelson and Alistair Darling met representatives from the banks and small businesses recently, and he was sure there would be further discussions going ahead. But to reiterate these were commitments that the banks themselves had entered into.

Asked if there was a flaw in the original contract that there was only a loose promise that banks would lend to small and medium sized enterprises, the PMS replied that the answer to that was no.

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» Monday, November 3, 2008

Interest Rates

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