Bank must cut interest rate this week, say economists

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As the financial markets move closer to total collapse it is feared there are few options available to save the economy from a major recession.

Ruth Lea, economic adviser to the Arbuthnot Banking Group, said: "The threat to the economy is now recession, not rip roaring inflation. Under these circumstances it is clear that rates should be cut - and cut by

0.5 per cent." Charles Davies, an economist at the CEBR forecasting think tank, said: "It is now a question of how much, not when they cut rates."

But with the decision on base rates not in the Government's hands there are very few other policy options open to Gordon Brown, commentators say.

George Buckley, UK economist at Deutsche Bank, said: "The problem for the Government is if it does bail out or recapitalise other banks it is going to be expensive. One thing they won't do is raise taxes to pay for it."

Howard Wheeldon, senior strategist at BGC Partners, called for political leadership on the level of Franklin D Roosevelt in the Thirties to stop fear and panic taking over. He said: "Most of all what we need now is demonstrable political vision."