Interest rate cut

The Bank of England has cut interest rates by a quarter of one per cent to 4.5 per cent.

The monetary policy committee backed a 0.25 per cent cut after narrowly voting to leaves rates unchanged at their last meeting.

Amid growing pessimism about the state of the economy, the bank decided to act.

House prices are dropping in some areas and manufacturing and commerce are reporting slowing sales.

Stakeholder Response: Council of Mortgage Lenders

 

 

 

The CML welcomes today's announcement by the Bank of England's Monetary Policy Committee that base rates will fall to 4.5 per cent - the same level they were at in June 2004.

 

Commenting on the rate cut, the first since July 2003, CML deputy director general Peter Williams said: "The rate cut will provide a welcome boost to consumer confidence and therefore help underpin the recent soft landing of the housing market. In recent months consumer confidence has been relatively weak, and data has shown households are becoming more cautious about borrowing.

 

"The rate cut will help stem the decline in consumer confidence and support the view that interest rates have peaked. It is possible that the MPC will consider future cuts, though these will need to be looked at in light of economic circumstances and inflationary pressures over the coming months."

 

Stakeholder Response: British Retail Consortium

 

 

BRC director general Kevin Hawkins commented: "The BRC welcomes the move by the MPC to reduce interest rates today, although it has been a long overdue decision.

 

"The cut in interest rates will take several months before it works through to consumer behaviour on the high street and needs to be reinforced by further reductions over the next few months if the economy continues to slow down."

 

Stakeholder Response: Construction Products Association

 

 

The Construction Products Association has welcomed today’s 0.25 per cent interest rate drop to 4.5 per cent, saying it will help stabilise the housing market and restore consumer confidence.

 

Commenting on the Bank of England’s decision to cut interest rates, Michael Ankers, chief executive of the association, said: "The sharp fall in consumer confidence in recent months has not only hit the new house market, but also had a major impact on consumer spending on housing repair and maintenance.

 

"The Bank’s decision today will help convince people that interest rates in the current cycle have now peaked and restore confidence to the housing market."

 

Stakeholder Response: Institute of Directors

 

 

Today's quarter point cut in interest rates by the Bank of England will be greeted with a huge sigh of relief from the business community, the Institute of Directors (IoD) said.

Graeme Leach, chief economist at the IoD, said: "The IoD had called for a quarter-point reduction in interest rates and so today's decision by the Bank was welcome news. Failure to cut rates now could have seen a more pronounced 'shift-to-thrift' by companies and consumers.

"The new lower rate of 4.5 per cent will help put a floor under business investment and household spending growth."

Stakeholder Response: Federation of Small Businesses

 

 

The FSB said: "The economic evidence in favour of a cut in interest rates was unequivocal and we welcome today’s decision by the MPC.The cut will benefit the vast majority of the UK’s four million small businesses, particularly start-ups.

 

"Small businesses have a total £62bn outstanding in loans and £12bn in overdrafts.  On average loan and overdraft debt today’s decision will save the average small business about £250 a year."