What Rock-Bottom Interest Rates Means To Me

Absolutely nothing.

Let me explain. Over the summer, I set up a fixed 6% interest ISA, meaning that even though interest rates are now at 2%, I will continue to get 6% until August 2009. So in real terms the value of my bank account will not dwindle, and give me a little windfall of about £20. We're not talking about substantial amounts of money here. I must add that this outcome was a matter of pure luck, rather than strategic economic investment!

However, low interest rates make the pound less attractive to foreign investors, so when we go abroad, we will be able to buy less with our pound.

Higher interest rates also control inflation better, but I'll refer you to an economist for the precise mechanics of how (I haven't the foggiest).

What is the best level of interest rates? That which keeps inflation reasonable and doesn't start a run on the pound.

So interest rate policy should consist of a series of targets for inflation and strength of the pound, and we should tailor the interest rates to meet these targets.

That is, in esccence,  the fiscal policy of the Bank of England, as a non-economist understands it. Simple, isn't it?