Commenting on the choices facing the MPC at its March 2008 meeting next Thursday, David Kern, Economic Adviser to the British Chambers of Commerce, said:
"Global and domestic economic circumstances have deteriorated since the February meeting. The markets expect the MPC to keep rates on hold in March, but the need for a further early cut is very clear. In the face of growing recession risks in the US, the Federal Reserve is expected to announce further aggressive interest rate cuts. It is not necessary, or even possible, for the MPC to cut UK rates as aggressively as in the US. But many of the problems facing the UK economy such as; high personal debt levels, an overblown housing market, and a large external deficit, are similar to those confronting the US.
"The Bank of England’s latest Inflation Report has signalled that a cut in UK interest rates would be needed, in spite of the temporary upturn in inflation expected in the next few months. The main debate is about timing. Waiting would be more dangerous; it could make things worse, and could create more difficult and unpalatable policy choices later in the year. We urge the MPC to cut interest rates to 5% on Thursday."