Quote:
Originally Posted by Taf
Rate rises hit those who already have loans. But the idea behind them is to put people (and businesses) off taking out new loans to slow the economy.
Why not make the rate rises only apply to new loans?
Or would that hurt the banks too much?
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That would require direct intervention in the commercial operations of private businesses - difficult and controversial, as it would require carefully constructed primary legislation to enable it.
By altering its own interest rate the Bank of England isn’t intervening directly in anyone else’s business, but is in effect changing the terms on which it does business with others. Exploiting its unique position at the heart of the financial system ensures its actions have significant effects on the wider system.