6th December 2007
Firms welcome interest rate cut
The Bank of England has cut the Bank interest rate from 5.75% to 5.5%, in response to signs of a slowing economy.
The fall, the first since August 2005, brings to an end a period that saw five rises of 0.25 percentage points, as the Bank struggled to maintain inflation at the government's 2.0% target.
Despite three rate increases in the months from August 2006, CPI inflation peaked at 3.1% in March, fuelled by strong oil prices and a surprisingly resilient housing market. In recent months, inflation has remained nearer the target, rising slightly to 2.1% in October, while other economic indicators have begun to show a slowdown.
Business organisations have been quick to welcome the announcement. David Kern, economic advisor to the British Chambers of Commerce, said: "Today's decision will give a much-needed boost to business confidence.
"With global risks likely to persist, and with credit conditions remaining too tight, a further small cut in rates may be required early in 2008."
The British Retail Consortium termed the cut "overdue", with director-general Kevin Hawkins issuing a strong call for further reductions.
"To soften the downturn that is clearly on the way for 2008 and avoid a full blown recession this must be the first of a series of cuts," he said.
"The sooner the Bank delivers the next one the better."
The fall, the first since August 2005, brings to an end a period that saw five rises of 0.25 percentage points, as the Bank struggled to maintain inflation at the government's 2.0% target.
Despite three rate increases in the months from August 2006, CPI inflation peaked at 3.1% in March, fuelled by strong oil prices and a surprisingly resilient housing market. In recent months, inflation has remained nearer the target, rising slightly to 2.1% in October, while other economic indicators have begun to show a slowdown.
Business organisations have been quick to welcome the announcement. David Kern, economic advisor to the British Chambers of Commerce, said: "Today's decision will give a much-needed boost to business confidence.
"With global risks likely to persist, and with credit conditions remaining too tight, a further small cut in rates may be required early in 2008."
The British Retail Consortium termed the cut "overdue", with director-general Kevin Hawkins issuing a strong call for further reductions.
"To soften the downturn that is clearly on the way for 2008 and avoid a full blown recession this must be the first of a series of cuts," he said.
"The sooner the Bank delivers the next one the better."
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