Business lobby groups today welcomed the Bank of England’s decision to cut the interest rate by 0.25%, but said further reductions were still needed.
The Bank’s Monetary Policy Committee (MPC) announced that the rate would be reduced to 5.25%, the first reduction since December when it was also cut by a quarter percentage point.
The MPC said it had taken the decision because credit conditions for households and businesses were ‘tightening’ and ‘business surveys suggest that further slowing is in prospect’.
David Kern, economic adviser to the British Chambers of Commerce (BCC), said the decision to cut the rate was necessary for the economy.
“In the face of worsening global and domestic conditions, a refusal to act would have entailed unacceptable risks. Today’s move, though vital to sustain confidence, is not adequate on its own.
"The recent dramatic rate cuts in the US highlight the importance of early action. Threats to growth are much more acute now than risks of higher inflation, and we would have welcomed a bold UK move to 5% today.”
Kern said that while the BCC understood the MPC’s reluctance to give a misleading impression of panic, it was crucial that it avoided ‘undue delay’.
He added: “To counter the mounting threats to the economy, we urge the MPC to cut interest rates to 5% in March.”
Stephen Robertson, director general of the British Retail Consortium said: “Having rejected a January rate cut, the Bank is right to act now to refuel the faltering economy and ensure it doesn't stall.
“Household bills are rising and there are job fears. Without a series of reviving rate cuts, consumer pessimism risks becoming self-fulfilling.”
© Crimson Business Ltd. 2008
