Economists are forecasting a further reduction of interest rates on Thursday as the Bank of England try to combat the current recession. A rate cut of ½% is expected to be announced with the aim of avoiding a long and drawn out slump in the economy.

Experts say that while a further reduction would be a little too late taking into accounts the Bank’s reluctance to lend not only to consumers but also between themselves, action had to be taken to tackle the current recession and also the prospect of deflation within the economy .

The consensus is for a 50 basis point cut which would take the Bank of England base rate to 1%.
However the real challenge is seen as getting credit to the parts of the economy that most need it and are in a position to actually use it.

Economists are now coming to the conclusion that the “blunt instrument” of cutting interest rates to control inflation is less and less effective.

Most economists believe a more innovative approach is required to control inflation, however we will have to wait and see if fresh ideas are forthcoming from the Bank of England, Treasury and the Financial Services Authority?

The UK economy needs stimulus now, not in 6 to twelve months time!