Commenting on today’s interest rate decision by the Bank of England’s Monetary Policy Committee, Dr Adam Marshall, Acting Director General of the British Chambers of Commerce (BCC), said:
“The Bank of England’s unsurprising decision to cut interest rates reflects an increasingly uncertain outlook for the UK economy as the new government begins to look at our changing relationship with the EU. Lower interest rates may give a helpful boost to market confidence, but have little long-term effect on businesses when rates are already so low. What businesses want is low, stable interest rates for the foreseeable future, which will enable them to make their own growth and expansion plans with confidence.
“The additional measures – expanding QE, purchasing corporate bonds and the new term funding scheme – go beyond what many expected, but will be welcomed by business. The term-funding scheme in particular will help to ensure that businesses benefit from cheaper loans so they can invest and grow.
“The MPC indicated that despite the historic low of 0.25%, the base rate could be cut even further in the coming months. Further rate cuts are unlikely to stimulate the real economy significantly, and also bring the threat of negative interest rates on businesses' deposits, which will be of significant concern to some.
“Instead of further cuts to rates in the future, the MPC should give careful consideration to developing the other measures announced in order to drive longer-term UK business growth. This could be through further purchases of business bonds, and expanding the scope of their intervention to include investments in the UK’s ageing infrastructure in key areas such as transport and communications.”