Interest Rates down to 2%
As economists forecast the possibility of a deep recession the Bank of England‘s Monetary Policy Committee has, once again, decided to substantially cut interest rates. Today’s decision sees the interest rate fall by a whole 1% to the new base rate of 2%.
Last month the MPC took the decision to slash the base interest rate by 1.5%, the greatest rate cut since the BoE was granted independence back in 1997.
Ian McCafferty, Chief Economic Adviser at the Confederation of British Industry (CBI)said;
“The economy needs a significant monetary stimulus and the Bank has clearly decided this will be best achieved by another big cut in interest rates. What is critical for business and consumers alike is that this reduction is passed on.
The economy is stalling, inflation is expected to undershoot the Bank’s own target and the headline RPI rate of inflation is likely to turn negative for at least a few months in 2009. We need to see lending improve and to keep business working.”
David Kern, Chief Economist at the British Chambers of Commerce (BCC), echoed these thoughts, saying:
"We are pleased with the MPC’s decision to cut interest rates by one per cent.
The less than impressive reaction to the PBR, and worrying signs that UK activity is falling sharply, make it critically important for the MPC to persevere with aggressive rate cuts. The UK economy faces serious risks.
There is a clear danger that unemployment will increase even more dramatically without urgent counter-measures. We strongly urge the MPC to cut interest rates by at least a further half per cent at its January meeting.”