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Interest rate cut 'needed to help combat credit crunch'

Apr 09 2008

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Businesses and consumers need a quarter per cent base rate cut tomorrow in order to increase consumer confidence, according to the Confederation of British Industry (CBI).

Director-general of the CBI Richard Lambert describes the monetary policy committee's (MPC's) choice as "a particularly finely balanced decision".

Struggling businesses would benefit from a quarter point cut as soon as possible in order to increase consumer demand.

"Despite the MPC's attempts to loosen monetary policy with two recent interest rate cuts, the credit crunch is pushing inter-bank and mortgage lending rates up, which is constraining economic activity and demand," he comments.

The Bank of England's target interest rate is two per cent each year.

However, the consumer price index, which is used to judge inflation levels, reveals that it is currently above this level. Further increases in the rate of inflation could be caused by another base rate cut.

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