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Bank of England urged to cut rates asap

Catherine Deshayes

The British Chambers of Commerce (BCC) has urged the Bank of England's monetary policy committee to lower the base rate as soon as they can, to avoid further housing market upheaval

Policymakers at the Bank of England were split three ways for the second consecutive month when they held interest rates at 5% two weeks ago.

One member wanted to hike rates by a quarter-point hike while another wanted to cut to 4.75%. The remaining seven members of the Monetary Policy Committee (MPC) voted to keep rates on hold.

Now, in a new report out yesterday, the BCC called for lower rates, saying that recession is a greater threat to the UK economy than inflation.

They warned that there is a danger of an economic contraction this year that could increase the number of unemployed to two million.

Director General David Frost, said, "The MPC should lower the base rate as soon as possible in order to ward off this threat.

"The longer the MPC waits before cutting rates, the bigger the danger that the economic situation will deteriorate," Mr Frost added.

Lowering of rates could be good news for those taking out mortgages as it could lead to further reductions in the cost of repayments, while any boost to the wider economy may aid the housing market as a whole.

The next chance the MPC will have to address the base rate question is on September 4^th. Following the call from the BCC, expectations are that the next move from the MPC will be to lower borrowing costs.

The minutes echoed the findings of the Bank's quarterly inflation report earlier this month noting that upside risks to inflation have eased in recent weeks particularly due to the slide in oil prices, leaving the door open for an interest rate cut.