ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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INTEREST RATES-Change of Course

Change of Course? ARE the days of high interest rates over? The US and German authorities have in recent weeks and months reduced their controlling rates. But it is in Britain that the sharpest decline is being witnessed. In its latest move, the bank rate has been reduced now to 7 per cent, the lowest for the past 15 years. With an inflation rate of less than 4 per cent, the real rate of interest in the UK is still going to be positive, at over three per cent. Of course, the British government could pick up courage and reduce the bank rate only after it decided to suspend its membership of the European exchange rate mechanism, generally referred to as ERM, and subsequently rid itself of the obligation not to let the sterling exchange rate vary outside the limits set for it, namely, 2.5 per cent above or below the par rate vis-a-vis ECU.

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