That snakey Bank of England

When I look at this chart, it tells me three things. First, although interest rates have risen recently, they still have some way to go before they reach a level consistent with price stability. In other words, rates are still too low and the Bank of England still have some way to go before they can be confident that inflation is back in its cage.

Second, the loosening of monetary policy during 2001 was so reckless and unprecedented that it amounted to criminal negligence on the part of the Bank of England. It was inevitable that with that kind of rapid and irresponsible reduction in rates that house prices would explode and personal indebtedness with reach unprecedented levels. With interest rates that low, what is the point of saving?

Finally, over the last seven or years, the base rate has snaked around in an incoherent manner. In 2003, the Bank cut rates twice and then it increased them. In 2005, it cut rates, refueled the housing bubble and then had to back-peddle, and push rates back up. In other words, the monetary policy committee is fickle, and at times, it isn't sure what it is doing.