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Deep interest rate cut likely
Paul Waugh, Deputy Political Editor30 Oct 2008
HOPES of a deep interest rate cut rose today after Chancellor Alistair Darling underlined his message that the Bank of England was now free to slash borrowing costs.
As a leading economist warned that Britain faced deeper recession without a one per cent cut next week, Mr Darling last night signalled that inflation was coming down to such an extent that rate cuts were now viable.
Today, Mr Darling repeated his message as he pointed out that the Bank had a remit to consider the risks of the slump facing the economy.
The US federal reserve last night cut its rate to just one per cent. The UK rate stands at 4.5 per cent and the City is expecting at least a half-point cut when the Bank meets next week.
Mr Darling stressed that neither he nor Gordon Brown would ever give the Bank's Monetary Policy Committee a direct order to cut rates, but he appeared to hint that that was what he expected to see.
"I am not going to tell the Bank of England what to do, because independence means just that, in the difficult as well as the good times," Mr Darling told Sky News. "The Governor is very aware of the need to do whatever he can to support the wider economy."
Mr Darling spoke after MPC member David Blanchflower called for aggressive rate cuts to stave off a deep recession.
Reader views (8)
With Mervyn King and Gordon Brown in charge, the lunatics truly are running the asylum. How can you possibly borrow and spend your way out of debt?!? this is madness!
- Zady, London, 31/10/2008 09:37
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So, we have historically low rates and still people cannot service their debts. We need savers not debtors. We are now a society based on debt. Remember the old saying "when you spend 99p in the pound happiness - when you spend 101 despair". Looney Brown got us into this mess but he has learnt nothing.
- Frederick, London, UK, 31/10/2008 07:41
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I thought the problem was liquidity, not the interest rate. Surely savers need a motive to put their money into institutions that can then lend it out for investors. Rock-bottom interest rates not only punish the prudent, but put us into the Japanese situation of a decade ago, when people simply kept their cash at home, confident that deflation would bring prices down. Taking money out of circulation is surely the last thing to encourage at this point? Say goodbye to foreign travel - perhapos no bad thing, but we seem to enjoy it - when the pound falls through the floor.
- Mdj, Leyton, e10 london, 30/10/2008 22:18
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Low interest rates caused the problem in the first place. The rate should go up to at least 7.5% and stay there...
- Epimethean, London, 30/10/2008 18:42
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I really feel'bogged off'that those of us retired folk who live off our hard earned pensions, interest on carefully amassed savings and who have probably been shafted in the Northern Rock and HBoS share robberies have now got to chip in once more by way of massive interest income loss to help put right what the political and financial cretins with the aid of thousands of irresponsible borrowers have done when they brought the nation's financial structure down around our heads. Why do we have to suffer these greedy fools and worse still ride to their rescue
- John, Leighton Buzzard, Beds, 30/10/2008 18:07
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I'd be anazed if Interest rates fell by just 1 per cent before Christmas. The Bank of England rarely heeds practice in the USA or the recommendations of the Chancellor or indeed the PM.
- Keith Price, Luton, England, 30/10/2008 17:52
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>>Chancellor Alistair Darling underlined his message that the Bank of England was now free to slash borrowing costs
I thought the BoE was free of Govt interference and direction already. Isn't this what Mr Broon did when he became chancellor in 1997 - to free the BoE from Govt control?
- Adam, Harrow, UK, 30/10/2008 15:53
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1% off please.
- William, London, 30/10/2008 15:44
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