Bank of Valletta lowers base rate to 3.75%

Karl Marx was wrong predicting that worker class will take over, but was right when he stated that an economy system based on greed will self-destruct.

A bank as strong as hsbc does not need to give high interest as hsbc is a secure bank. Those who give higher interest is not because they love their customers but because there is a risk. HSBC policy proved to be the best.. not only in Mlata but in the world

Well done BOV! It continues to lead the sector. I am sure that this Bank will weather this storm and come out even stronger

I can forsee with all this global doom and gloom, Malta unfortunitly will also suffer in the tourist trade as i think this xmas is going to be a really quiet one, in a way that we never seen it before. Lets hope world markets will pick up as for tourists from the UK and the pound being so low against the € & the $ its not a good sign.. more need to be done lowering interest rates and fuel charges,The pensioners must be feeling the pinch and these are the people that must be looked after and also the people in the lower wage bracket that need it more..

@Kevin Farrugia

HSBC always take their time in press releases when a rate decrease is announced - not likewise when the rates increase however...

Martin Büttner
"I personally had expected this situation already a year ago."
Pity our Minister does not have you as a consultant.

Called HSBC today , and they said that they still have not received any official directions as to whether the base rate will be reduced or no. But with BOV lowering its base rate, I guess that HSBC will soon follow suit! At least, I hope so!!

@ M. Buttner

The law of economics is not working well. Look at Iceland. Thier govt. kept high interest rates to control inflation, but borrowers there sought (cheaper) borrowing from abroad and everyone (now) knows what happened then.

And BOV did not declare a positive year ahead. Better said, they had warned that the year ahead would be tough, that's (also) why their shares decreased.

hsbc proved to have the strongest vision in the world banking better than all the rest.

Lowering the interest rate by that much will easily reduced my homeloan by as much as Eur40 ....always a welcome move when the economy is slowing down.

Clever comments.

Prior to this decision, indications were that inflation was decreasing (although higher than the ECB's target) thus it does not appear to be of that much concern. Just a few days ago Trichet had repeatedly reminded that the ECB will act when required and is not limited to do so only at its monthly monetary policy meetings - so perhaps this move could have been deduced.

@ S. Agius

The lowering of the base rate has not really calmed down the panicking market.
The laws of economics actually are working to perfection, except for the investment and banking sector. What we are currently seeing had to happen sooner or later. I personally had expected this situation already a year ago.
The stock exchanges do not reflect the economical situation anymore. How can it be that a company declares a record profit and gives a very positive outlook for the coming year, but its shares fall and fall and fall?
Lowering the base rate does not influence the banking sector only, but also the entire economy. This is where I see the danger.
More money on the market makes itself worth less, so prices rise. All prices rise, but mostly consumer prices. So the consumer pays for it at the end.
The turbulences on the banking sector are a process of consolidation. In the coming weeks we will see more mergers. Buyng a bank with its full infrastructure has never been cheaper than today.

lowering the base rate should mean loans should carry a lower interest rate no? This should make the price of borrowing cheaper so i cannot see why it should push inflation up... but then i'm not an economist and i could be wrong

Will HSBC follow?

@ Martin Büttner

Considering the particular situation of the financial markets and investor/retail sentiment I do not believe that the lowering of the base rate necessarily implies a further rise of inflation. The laws of economics are not exactly working to perfection at the moment and thus i don not necessarily believe that lowering the cost of money would mean people throwing more money in the economy thus pushing up prices. Apart from the fact that this will also take time to realize, one has to also add the factor that the Euro area is primarily suffering from cost-push inflation.

Lowering the base rate was an important step by the ECB to strengthen trust within the financial services again.
However, lowering the base rate will also have an effect on inflation, and this effect will not be a good one.
The euro area is already suffering from a very high inflation rate. Now it will rise even further
and the people will feel it even more.