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Tuesday 10th of November 2009
February 9, 2009    

Base rate cuts insufficient to revive economy

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by David Masters

Base rate cuts alone may not be enough to revive the UK economy, Lloyds TSB has warned.

Trevor Williams, an analyst at Lloyds TSB, said the Bank of England must start thinking about alternative stimuli.

The ‘economic woes’ that led to last week’s base rate cut ‘will not disappear overnight’, said Williams.

With the base rate at a record low, “the UK needs to be ready to face a period where the ability of base rates to be used as a lever on the economy is almost entirely diminished.”

He added: “Now is definitely the time to discuss what other tools might be used to revive the economy.”

The Bank of England’s monetary policy committee (MPC) said last week’s rate cut was made to address a ’synchronised downturn’ across the world’s economies.

Output across advanced economies is drastically reduced, the MPC noted, whilst emerging economies have seen their growth sharply curtailed.

“Businesses have responded to the worsening outlook by running down inventories, cutting production, scaling back investment plans and shedding labour,” the MPC said.

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