Business groups are calling on the Bank of England to cut interest rates when its Monetary Policy Committee (MPC) meets for the first time this year on Thursday.
Manufacturers’ organisation the EEF, said the move was necessary in the face of growing signs of a more significant economic slowdown.
“The evidence from the past month points to a growing risk of a weaker economy at home and abroad,” said Steve Radley, the EEF’s chief economist.
“While manufacturing has been in good shape, it would not be able to escape the negative effects of a downturn in domestic and export markets. The Bank therefore needs to act quickly to offset the impact of deteriorating financial conditions on the UK economy.”
The British Chambers of Commerce (BCC) argued that the economic pessimism which greeted 2008 was cause for a ‘modest cut’ to 5.25%.
David Kern, economic adviser to the BCC, said: “We understand the dilemmas facing the MPC. After cutting rates to 5.50% in December, the MPC’s natural inclination is probably to wait at least until February.”
However, Kern said that while a hold on rates was expected on Thursday, the BCC believed it would be the wrong decision for the MPC to make.
He added: “Given the immediate threats, the risks of waiting are greater today than the risks of acting early.
“While a 2008 economic slowdown is inevitable, a recession can be avoided if correct measures are adopted without undue delay.”
© Crimson Business Ltd. 2007
