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Bank urged to cut rates as service sector suffers
Hugo Duncan05.11.08
THE Bank of England was today asked to slash interest rates after a key part of the economy sank deeper into recession.
The call from City analysts came as activity in the services sector, accounting for nearly three quarters of output, fell for the sixth month in a row last month to its worst level on record.
The figures were released hours before the Bank's monetary policy committee began its two-day meeting to set rates. It is widely expected to cut rates from 4.5 per cent to four per cent when the meeting ends tomorrow, but hopes are rising it may go even further with an aggressive cut to 3.5 per cent.
Howard Archer, chief UK economist at Global Insight, said: "Given the very serious and ever-growing danger that the economy will suffer extended, deep recession, we believe that there is a compelling case for the Bank to get on with the job and deliver a full one percentage point cut from 4.5 per cent to 3.5 per cent."
Such a cut should bring much-needed relief for borrowers struggling to keep up with mortgage payments - but only if banks and building societies pass on the lower rates. Lenders this week warned there was no guarantee customers would feel the full benefit.
The Chartered Institute of Purchasing and Supply said its barometer of activity in the services sector - which includes City stockbrokers, hotels and restaurants, and transport and computing firms - fell from 46 in September to 42.4 last month. It was the lowest figure since records began in 1997 and the sixth consecutive month below the 50 cut-off point marking the difference between growth and decline.
