MPC member calls for aggressive rate cuts to stave off recession

| October 30, 2008 | 0 Comments

Professor David Blanchflower, a member of the Bank of England’s Monetary Policy Committee (MPC), is calling for aggressive interest rate cuts in order to boost Britain’s economy and stave off the prospect of a deep and prolonged recession.

In response, Chancellor Alistair Darling appeared to be supporting Prof Blanchflower’s call after he stressed that while he wouldn’t appear to influence the MPC’s decision, he did suggest that he expected to see further rate cuts.

He added that the Bank‘s Governor, Mervyn King, is very aware of the need to do whatever he can to support the wider economy.

Earlier this month, the Bank of England as part of a co-ordinated move with both the Federal Reserve and European Central Bank (ECB), cut interest rates by half a percentage point.

Yesterday, the US Federal Reserve cut interest rates a further 0.5% to 1%. Prior to the Fed’s announcement, interest rates were also cut in China and Norway, in what is likely to be a global round of emergency interest rate cuts.

Many analysts believe that the Bank of England and European Central Bank will follow suit next week.

Earlier this month, economist Roger Bootle, said he believes that interest rates in the UK could fall below the 2% mark, the lowest figure since the Bank of England was established in 1694.

Mr Bootle predicts a fall to 3.5% by the end of the year and 2.5% or 2% by spring and lower if the economic situation deteriorates.

As global stock markets reacted positively to the Fed’s decision to cut interest rates, sterling continued to make a small recovery against the dollar today.

Earlier this week, the pound plummeted to a near six-year low against the dollar. However, it is still considerably lower than the $2.01 mark it reached just three months ago.

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