MPC must cut rates to 1 per cent

Commenting on the choices facing the MPC at its January 2009 meeting next Thursday, David Kern, Chief Economist at the BCC, said:

“The rapid worsening in the economic situation and growing fears over rising unemployment reinforce the need for the MPC to continue with aggressive interest rate cuts.

“To alleviate the most devastating consequences of the serious recession, we urge the MPC to cut rates by a full one per cent on Thursday, to one per cent. A prolonged depression can still be averted if the authorities adopt forceful measures.

“But interest rate cuts, though important, are no longer adequate on their own. They will have to be supplemented by new and more far-reaching policies – additional fiscal stimulus and quantitative monetary easing.”