The Bank of England’s Monetary Policy Committee (MPC) acted today to reduce the official Bank Rate by one percentage point to two per cent as a result of the downturn in the economy.
In the UK, it said, consumer spending and business investment have stalled, while residential investment has continued to fall.
Despite the actions taken to raise bank capital, ease funding and improve liquidity, conditions in money and credit markets remain extremely difficult, it added, noting that it was unlikely that a normal volume of lending would be restored without further measures.
Commenting on the decision by the MPC, Ian McCafferty, CBI chief economic adviser, said: 'The economy needs a significant monetary stimulus and the Bank has clearly decided this will be best achieved by another big cut in interest rates. What is critical for business and consumers alike is that this reduction is passed on.'
The news comes hard on the heels of a report from the EEF, the industry body for engineering and manufacturing employers, which warned that despite the improved performance of manufacturing in recent years, the sector is now going through a significant and sustained downturn.