News and features

Mon, 8 Dec 2008

BCC: Rates cut needed to avoid major recession

National body calls for "prompt" rate cuts to safeguard businesses and consumers from deep recession.

The UK can still avoid a "major" recession but in order to do so, the Bank of England's monetary policy committee (MPC) must not put off interest rate reductions for too long, the British Chambers of Commerce (BCC) has warned.

The organisation said this week's decision by the Bank of England's monetary policy committee to leave interest rates unchanged for the fifth month in a row at 5.0 per cent was "understandable" given rising inflation.

However, the BCC's economic adviser David Kern said the committee "cannot ignore the fact that the UK is very likely in technical recession already" and must cut rates as soon as is practical in order to head-off a major economic contraction.

"The MPC should start cutting interest rates promptly in the next few months, as soon as UK inflation peaks," he said.

Meanwhile, another expert has said that if the economy does enter recession, it will be "mild" compared to previous downturns - although it will still be the "worst situation" since the early 1990s.

Nevertheless, Global Insight's chief UK and European economist Howard Archer said he does not expect to see "significant recover" until late 2009 or 2010.