Commenting on the choices facing the MPC tomorrow (Thursday), David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“Persistent falls in lending to business could threaten the early signs of recovery. One must now question the conventional view that cutting rates below 0.5% will not help.
“By cutting rates further and by considering, in limited circumstances, a negative interest rate - along the lines adopted in Sweden - the MPC could discourage hoarding of cash, and encourage lending. “The quantitative easing programme must also become more aggressive.
By increasing the proportion of company debt purchased, and by applying QE to a wider range of private sector assets, the MPC would further stimulate the flow of credit to businesses. The recovery faces big risks and more unconventional steps are needed to ensure there is no relapse.”