Page last updated at 13:32 GMT, Thursday, 6 November 2008

Widespread welcome for scale of rate cut

Cash and cards
There has been widespread reaction to the surprisingly large cut in interest rates announced by the Bank of England.

The Bank explained its move by pointing to an imminent "sharp slowdown in the economy", in other words an impending recession.

And with a sharp fall in inflation expected in the coming year, the Bank said interest rates needed to be cut from 4.5% to 3%.

ADRIAN COLES, BUILDING SOCIETIES ASSOCIATION

This reduction in the Bank Rate will provide some support to the housing market and especially borrowers on tracker rates.

However, borrowers looking for new fixed rate deals or homeowners with mortgages linked to money market rates will not necessarily find their mortgage rates decreasing.

RICHARD LAMBERT, DIRECTOR GENERAL, CBI

It reflects what our members are telling us which is that the economy is moving really rapidly down hill and the Bank clearly felt the need to get ahead of the curve and make what is a very bold and decisive step.

They've never cut by more than half a point before. They like to move in short stages.

They've clearly decided rates are coming down fast we might as well get on with it and that's a good thing.

GRAEME LEACH, CHIEF ECONOMIST, IoD

This is a bold and aggressive move by the MPC and just what the economy needs.

We think interest rates could touch record lows of 2% or less by this time next year. The sooner we get interest rates down the less is the risk of a long and deep recession.

MICHAEL COOGAN, COUNCIL OF MORTGAGE LENDERS

They have grasped the nettle in a worsening recession environment.

What is important is how this feeds through to lenders' borrowing costs - and lenders will need to balance the interests of savers, as well - but such a sharp downward movement provides more room for lower borrowing costs more quickly.

STEPHEN ROBERTSON, BRITISH RETAIL CONSORTIUM

This is the kind of shock tactic that could get the economy's heart beating again. A more modest cut was widely expected and already largely factored in.

A cut on this scale puts the banks under more pressure to pass the benefits on to borrowers. Base rate reductions can't achieve much if they don't help household finances.

This dramatic cut for Christmas could give customers the confidence to spend at what is many retailers' most important time of the year.

DAVID KERN, BRITISH CHAMBERS OF COMMERCE

We support the MPC's decision to cut rates by more than analysts expected.

But we believe the MPC should move much more steadily and deliberately and avoid too many lurches towards emergency measures.

ADAM LENT, HEAD OF ECONOMICS, TUC

This is the right call. It shows the Bank now understands that the problem is recession not inflation.

But the real challenge is to ensure that these cuts are passed on to both business and mortgage customers.

Too many banks seem to be more interested in hanging on to their bonuses than using the huge bail out from the taxpayer for its proper purpose of getting the economy moving again.

SIMON RUBINSOHN, ROYAL INSTITUTION OF CHARTERED SURVEYORS

This recognises the severity of the downturn and the squeeze on credit.

This reduction in the rates should now enable lenders to pass on a significant amount of the benefit to the high street.

Those at the margins on variable rate mortgages will breath a sigh of relief as they find their mortgage repayments more affordable.

ROGER BOOTLE, ECONOMIC ADVISOR TO DELOITTE

The cut in interest rates, from 4.5% to 3%, is an extremely bold move and shows that the MPC appreciates the seriousness of the situation.

But more needs to be done. I think that interest rates need to be cut to the unprecedented level of 1%, and quickly.

Rates have never before been this low, but extraordinary times require extraordinary action. And it is not impossible to imagine circumstances under which rates end up having to go lower, perhaps even to zero as they have done in Japan.



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