Many say BoE should have reduced interest rates
April 3, 2008
In an announcement following the November Monetary Policy Committee meeting the Bank of England stated that interest rates would be kept on hold for a fourth month in a row, at 5,75%. They have been at this level since July of this year following a series of five 0.25% rises that took the base rate from 4.5% in August 2006 to 5.75% by July of 2007. Although the move had been widely expected by economists and analysts the Bank of England has been slated by many for not bringing down the interest rate following the meeting.
One property investment official stated: “It’s about time that the Bank of England’s MPC saw sense and realised that the clear and present danger to the UK economy from the continuing effects of the credit crunch is more important than the less clear possibility of future pressures upwards on inflation.”
An official from the brokerage John Charcol said after the meeting: “A cut of 0.25% today would at least have pushed three-month Libor back down to about 6%. It would also have started to redress the Bank of England’s policy mistakes, as outlined in last month’s Financial Stability Report, in dealing with the credit crunch. These are all good reasons why the MPC should have cut today. Their failure to do so means that today’s opportunity to mitigate the potentially serious problems building up in the banking system has been lost.”
Another official stated that he hoped interest rates would be cut in December. He said: “Credit conditions have become tighter since August, both globally and in the UK. The dangers to the economy have worsened and businesses require easier credit conditions without undue delay, to avoid a nasty reversal. We urge the MPC to announce a small interest rate cut in December.”
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