Interest Rates February 2007

• The Bank of England increased its bank rate in January by 25 basis points to 5.25 percent. The increase is the third 0.25-percent rise since August 2006. In a press release, the BOE said, “In the UK, output continues to rise at a firm pace. Domestic demand has grown steadily and credit and broad money growth remain rapid. The international economy continues to grow strongly … (T)he risks to inflation now appear more to the upside.”
  
  
• The Central Bank of Brazil continued to drop the Selic rate, cutting it 25 basis points to 13 percent in January. The cut is the 13th since September 2005, when the selic was reduced 0.25 percent to 19.5 percent. The rate was introduced in 1998 in the midst of a currency crisis in the country, and currently stands at an all-time low.
  
  
• Norway’s Norges Bank raised its deposit rate 25 basis points in January to 3.75 percent. The increase was the third 0.25 percent rise in as many months, and eighth since the rate stood at 1.75 percent at the end of 2004.
  
  
• The Central Bank of Chile ended almost four years of rate increases by dropping its discount rate 25 basis points in January to 5 percent. The rate had steadily moved up from 2.5 percent in 2003 to 5.25 percent in July 2006.
  
  
• The Bank of Thailand also bucked a long trend by dropping its 14-day repurchase rate 0.25 percent in January to 4.75 percent. The move comes after 13 consecutive increases pushed the rate from 1.25 percent at the end of 2003.
  
  
• The Bank of Indonesia cut its BI reference rate again in January, this time 25 basis points to 9.5. The drop was the seventh in as many months and eighth in 10 months, although all of the previous seven were 0.50-percent cuts. The January 2006 12.75-percent rate marked a multi-year high.
  
  
• The Bank of Israel also kept up a streak in January, dropping its short-term lending rate for the fourth consecutive month. The cuts follow seven straight rate increases, which pushed the shortterm lending rate from 3.5 percent in January 2005 to 5.5 percent in July 2006.