30 October 2008
A member of the Bank of England's monetary policy committee has called for aggressive cuts in interest rates to prevent the economy from entering a deep recession. In a speech at the University of Kent, David Blanchflower said monetary policymakers must focus on the wider issue of economic stability as well as inflation. Since the UK has now entered a period of negative growth, large rate cuts are needed to stimulate the economy and restore confidence, he claimed. "My view remains that interest rates do need to come down significantly - and quickly," he remarked. "If rates are not cut aggressively we do face the prospect of a relatively deep and long-lasting recession." Further rate reduction could bring some relief to borrowers with secured loans if lenders cut their own rates in response to central bank moves. Looser monetary policy may also make it easier to secure credit. Meanwhile, the Chancellor has spoken in support of a further cut in the base rate next week, which the vast majority of analysts are now expecting.