SO THE Federal Reserve didn't push the button after all. All the speculation and the debate will now have to focus on October or (more probably) December for the first increase since 2006. On balance, we feel this was a sensible decision; the Fed didn't want to join the ranks of banks that tightened too soon.
But the zero rate regime illustrates the old adage that "it is better to travel hopefully than to arrive". And that is neatly illustrated in a new blog post from a Bank of England staffer, May Rostom. Most British homeowners have variable rate mortgages (or short-term fixed rate deals) so interest rate cuts staved off a potential disaster in the housing market. The good news is that fewer people were forced out of their homes; the bad news is that the housing market didn't "clear" as it did in the US, with prices returning to more affordable levels.
As the economy recovered in 2012-13, house prices took off again, particularly in London. The ratio of house prices to...Continue reading
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