CBI stands firm on interest rate calls

CBI stands firm on interest rate calls

The Confederation of British Industry says it will stand by its call for the Bank of England to reduce interest rates by half a percentage point, despite contradictory advice from another economic think-tank.

The National Institute of Economic and Social Research said leaving interest rates unchanged would not adversely affect economic growth. It said the UK would avoid a recession and would see its economy grow by 2.3% this year and 2.1% next year, with inflation easing.

But the CBI said it stood by its call for an interest rate cut. A spokeswoman for the industry body said its recent survey looked at what was happening across all sectors of the economy, not just manufacturing.

In the survey CBI director-general Digby Jones said business needed decisive and meaningful action to shore up confidence, which meant a half of one percent cut in rates.

‘With the inflation outlook benign, there is ample scope for the Bank to lower rates and the economic situation justifies a half-point cut. If the bank was not to cut rates by half a point now, it is difficult to think of a situation when it will,’ he added.

In support of the upbeat nature of the NIES report, the British Bankers Association confirmed that consumer credit grew in September, while the government’s quarterly GDP figures show the economy had expanded by 0.6%, compared with 0.4% last year.

However, the government did say long-term fallout from the terror attacks in America would dampen GDP in the fourth quarter.

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