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Rate cut should be 1%

Jan 06 2009

The monetary policy committee should cut rates to one per cent this Thursday but this alone will be inadequate and should be backed up with other, far-reaching policies, one organisation states.

David Kern, chief economist at the British Chambers of Commerce (BCC), says aggressive rate cuts need to be seen this week to alleviate fears over rising unemployment.

He adds: 'A prolonged depression can still be averted if the authorities adopt forceful measures ... we urge the MPC to cut rates by a full one per cent on Thursday, to one per cent.'

According to the expert, these rate cuts alone will not be enough to revive the economy, saying they will have to be aided by 'additional fiscal stimulus' and an increase in the amount of money available.

The Financial Times has predicted Thursday's rate cut will see a 50 basis point drop, to 1.5 per cent, which would lead to the lowest rate since the Bank of England began in 1604.

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