OMEN
02-05-2009, 09:58 AM
The Bank of England is widely expected to reduce UK interest rates to 1% from the current 1.5% when it makes its latest monthly decision later.
With the recession showing no signs of easing, most analysts agree the Bank will cut rates further as it aims to help stimulate the economy.
However, some business groups do not want a further cut, as they say recent reductions have failed to help.
Instead they want the Bank to do more to help restore lending levels.
UK interest rates have so far been reduced four times from October's 5% to January's 1.5%, the lowest rate in the Bank's 315-year history.
'Struggling for finance'
The Federation of Small Businesses (FSB) is one of the business groups saying it would prefer rates to stay on hold for February.
It said that a survey of its members found that 63% wanted rates to remain at their current level, compared with only 24% who wanted a further cut.
In December, 58% of its members had called for a reduction.
"These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required," said FSB national chairman John Wright.
"Small businesses are clearly worried that this monetary policy has been used extensively over the last few months yet they are still struggling to access cheaper finance."
Mr Wright said the onus now should be on getting the commercial banks to start lending at the already low rate of interest "to fire up the economy".
Stephen Alambritis, of the FSB, told to BBC: "We believe that if there was a further cut there would be no impact".
"The wise move would be for the Bank of England to say 'hold your horses, that's it, it's 1.5%, go and borrow wisely, go and spend wisely, don't sit back and think money is going to get any cheaper'".
Bank lending
The FSB's position is shared by influential think tank National Institute of Economic and Social Research (NIESR), which said there was "not very much point" to January's rate cut.
However, the Bank has been doing more than just cutting interest rates.
It revealed earlier this week that it had lent £185bn to financial institutions since April last year, in an attempt to help improve their liquidity.
The Bank said that 32 banks and building societies had taken part in the scheme.
Worsening recession?
Official figures showed in January that the UK is now in recession, following two consecutive quarters of falling economic output in the second half of 2008.
The economy contracted by 0.6% between July and September, and by 1.5% from October to November, Office for National Statistics (ONS) figures showed.
The ONS also said UK unemployment had risen to 1.92 million in the last quarter of 2008 - the highest level since 1997.
NIESR predicts that the economy will now shrink by 2.7% in 2009, its worst performance for 60 years.
Figures from the Purchasing Managers' Index (PMI) released earlier this week showed manufacturing remained weak last month, despite a slight improvement on December.
BBC
With the recession showing no signs of easing, most analysts agree the Bank will cut rates further as it aims to help stimulate the economy.
However, some business groups do not want a further cut, as they say recent reductions have failed to help.
Instead they want the Bank to do more to help restore lending levels.
UK interest rates have so far been reduced four times from October's 5% to January's 1.5%, the lowest rate in the Bank's 315-year history.
'Struggling for finance'
The Federation of Small Businesses (FSB) is one of the business groups saying it would prefer rates to stay on hold for February.
It said that a survey of its members found that 63% wanted rates to remain at their current level, compared with only 24% who wanted a further cut.
In December, 58% of its members had called for a reduction.
"These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required," said FSB national chairman John Wright.
"Small businesses are clearly worried that this monetary policy has been used extensively over the last few months yet they are still struggling to access cheaper finance."
Mr Wright said the onus now should be on getting the commercial banks to start lending at the already low rate of interest "to fire up the economy".
Stephen Alambritis, of the FSB, told to BBC: "We believe that if there was a further cut there would be no impact".
"The wise move would be for the Bank of England to say 'hold your horses, that's it, it's 1.5%, go and borrow wisely, go and spend wisely, don't sit back and think money is going to get any cheaper'".
Bank lending
The FSB's position is shared by influential think tank National Institute of Economic and Social Research (NIESR), which said there was "not very much point" to January's rate cut.
However, the Bank has been doing more than just cutting interest rates.
It revealed earlier this week that it had lent £185bn to financial institutions since April last year, in an attempt to help improve their liquidity.
The Bank said that 32 banks and building societies had taken part in the scheme.
Worsening recession?
Official figures showed in January that the UK is now in recession, following two consecutive quarters of falling economic output in the second half of 2008.
The economy contracted by 0.6% between July and September, and by 1.5% from October to November, Office for National Statistics (ONS) figures showed.
The ONS also said UK unemployment had risen to 1.92 million in the last quarter of 2008 - the highest level since 1997.
NIESR predicts that the economy will now shrink by 2.7% in 2009, its worst performance for 60 years.
Figures from the Purchasing Managers' Index (PMI) released earlier this week showed manufacturing remained weak last month, despite a slight improvement on December.
BBC