Commenting on the choices facing the MPC at its March 2009 meeting next Thursday, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: 

“In the face of continued dire economic prospects, both in the UK and globally, we urge the MPC to cut interest rates by a further half point on Thursday. While the effectiveness of the interest rate weapon diminishes at very low levels, the net effect of a rate cut is still stimulatory and will benefit the economy. 

Monetary policy will have to remain expansionary even after interest rates fall to almost zero. While the aims of a quantitative strategy are broadly understood, it is important for the authorities to clarify the scale of the planned operations, and their likely impact on the relationship between the Bank, MPC and Treasury. 

“If, in addition to removing blockages in the credit markets, the aim is to increase the money supply, the Bank of England must spell out what rate of monetary growth they are targeting. Greater clarity will help to assuage concerns in the markets, and should lessen potential speculation against sterling.”