Commenting on the choices facing the MPC at its April 2008 meeting next Thursday, David Kern, Economic Adviser to the British Chambers of Commerce, said:
“In the face of evidence that the credit crisis is becoming increasingly dangerous, the MPC is now expected to cut interest rates to 5% on Thursday. This move is urgently needed, and long overdue, but it is no longer sufficient. We urge the MPC to consider a further cut in rates in May, to 4.75%.
“Threats to the economy have worsened since the March MPC meeting, both globally and in the UK. The American economy may be already in recession. In the UK, growing risks of falling house prices will have damaging effects on consumer spending and the wider economy. The UK is very vulnerable, and it is complacent to ignore the similarities between our economic problems and those of the US.
"Inflation risks are serious, and the MPC must be vigilant. However, the threats to growth are more urgent, and the MPC must be more proactive. Undue delay in cutting interest rates reduces the effectiveness of steps that the MPC itself has already anticipated. The availability of credit is tightening, and it is vitally important to ensure that problems in the UK mortgage market do not damage the productive sector of the economy.”