Further cut in UK rates expected

IveSeenTheLight

The Bank of England is widely expected to reduce UK interest rates to 1% from the current 1.5% when it makes its latest monthly decision later.
With the recession showing no signs of lessening, most analysts agree the Bank will cut rates still further as it aims to help stimulate the economy.
However, some business groups do not want a further cut, as they say recent reductions have failed to help.
Instead they want the Bank to do more to help restore lending levels.
UK interest rates have so far been reduced four times from October's 5% to January's 1.5%, the lowest rate in the Bank's 315-year history.
'Struggling for finance'
The Federation of Small Businesses is one of the business groups saying it would prefer rates to stay on hold for February.
The recent interest rate cuts are not having the desired effect and other means of economic stimulus are required


FSB national chairman John Wright


It said that a survey of its members found that 63% wanted rates to remain at their current level, compared with only 24% who wanted a further cut.
Back in December, 58% of its members had called for a reduction.
"These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required," said FSB national chairman John Wright.
"Small businesses are clearly worried that this monetary policy has been used extensively over the last few months yet they are still struggling to access cheaper finance."
Mr Wright said the onus now should be on getting the commercial banks to start lending at the already low rate of interest "to fire up the economy".
Bank lending
The FSB's position is shared by influential think tank National Institute of Economic and Social Research (NIESR), which said there was "not very much point" to January's rate cut.
It would however be wrong to think the Bank has only been cutting interest rates.
Instead it revealed earlier this week that it has now lent £185bn to financial institutions since April last year, as it has tried to help improve their liquidity.
The Bank said that 32 banks and building societies took part in the scheme.
Worsening recession?
Official figures showed in January that the UK is now in recession, following two consecutive quarters of falling economic output in the second half of 2008.
The economy contracted 0.6% between July and September, and by 1.5% from October to November, said the Office for National Statistics (ONS).
The ONS also said UK unemployment rose to 1.92 million in the last quarter of 2008 - the highest level since 1997. NIESR predicts that the economy will now decline 2.7% in 2009, its worst performance for 60 years.

http://news.bbc.co.uk/1/hi/business/7870768.stm

keet83

its right, the worst has happened for me and other sensible savers! 1 messily percent! :mad: It is obviously not helping companies as NIESR said. will they continue to lower the interest rate in the next few months to 0.5% or even worse, 0%?
i'm getting very annoyed with this interest reduction. I just hope that theres a decent fixed bond ISA available in April so i can stash some of my well earned and saved money!