Commenting ahead of the MPC’s interest rate decision tomorrow (Thursday), David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“In the face of a worsening recession and falling confidence, we urge the MPC to cut interest rates by a further half point. The net effect of a rate cut, although reduced at very low levels, is still expansionary overall. Lower rates will have a positive impact on asset prices and on the banking sector's capital base.
“But, the main aim from now on must be to launch quantitative and credit easing in a manner that helps restore business and consumer confidence. To alleviate the recession, it is important that the quantitative measures are forceful and decisive. It is important to avoid undue timidity.“As monetary policy enters a new phase, the authorities must be as transparent as possible about their actions. To assuage concerns in the markets, and to lessen potential speculation against sterling, there must be clarity about the scale of the planned quantitative operations. The authorities must also give details about the future allocation of responsibilities between the Bank of England, MPC, and Treasury.”