Interest Rates

SCOTLAND is seeing a growing divide between rich and poor, according to new figures, as health continues to improve in more affluent areas.

Turmoil in the credit markets

Credit markets are in turmoil. Christian Stracke, analyst with CreditSights, answers your questions on what it all means.

Christian Stracke: The major emerging markets economies have been swept up in the same global liquidity glut that helped to pump up the subprime sector, Spanish real estate, commodities, etc. Fortunately, most EM governments have been avoiding a lot of borrowing from foreign investors (with a few important exceptions, of course), so we don't have to worry as much about a classic debt crisis the way investors had to deal with the debt crisis of the 1980s, the Tequila crisis in 1994-95, the Russia crisis of 1998, and most recently the Argentina default.

India is waking up to tackling glut of cash

Indian authorities may have finally become serious about mopping up unwarranted liquidity in the banking system.

With Tuesday's announcement of a 50-basis-point increase in the ratio of deposits that lenders have to keep with the central bank as unremunerated reserves, the call-money rate may now rise from the 0.17% level to which it fell last week.

Overnight rates hovering near zero in an economy that's growing at a 9% annual pace, and where inflation may be simmering just beneath the surface?

That wasn't just ridiculous; it was plain dangerous.

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Central banks' easy virtue, easy money

There's an old story about the late British statesman Winston Churchill at a party. Probably on one of those many nights where never in the field of human excess had so much cognac, brandy and scotch been consumed by a person who historians now say was not an alcoholic, he staggered up to a socialite matron and posed a question:

Churchill: "Madam, would you sleep with me for 5 million pounds?" (In the 1930s, when the British pound was worth more than twice as much to the US dollar than it is now, this was a



particularly impressive sum over which to surrender one's virtue.)
Woman: "My goodness, Mr Churchill ... Well, I suppose ... we would have to discuss terms, of course."
Churchill: "Would you sleep with me for 5 pounds?"
Woman: "Mr Churchill, what kind of woman do you think I am?!"
Churchill: "Madam, we've already established that.

Fed leaves benchmark interest rate unchanged

WASHINGTON -- The Federal Reserve left a key interest rate unchanged on Tuesday as worries about inflation trumped concerns about turbulent financial markets.

Fed Chairman Ben Bernanke and his colleagues voted unanimously to keep their target for the federal funds rate, the interest that banks charge each other, at 5.25 percent, where it has been for more than a year.

The Fed decision came after a volatile couple of weeks on Wall Street as investors have been beset by troubles in global credit markets stemming from a sharp rise in defaults on subprime mortgages.

In a brief statement, the Fed acknowledged the turbulence and said the downside risks to the economy had "increased somewhat."

But the Fed continued to state that the predominant risk remained that inflation "will fail to moderate as expected."

Many analysts believe the Fed will remain on hold through the rest of this year, preferring to watch and make sure that inflation moderates back to an acceptable level.

Interest rate rise No.2 tipped

THE prospect of interest rates jumping to 6.75 per cent in early 2008 increased significantly yesterday following the release of the Reserve Bank of Australia's statement on monetary policy.

The RBA statement said: "With the economy growing at a higher-than-average pace, capacity pressures are likely to persist in the near term".