Fears of recession, the strength of the pound, competition from Europe and interest rate cuts in the US have led a majority of FDs to say the Bank of England should cut UK interest rates in this week's Accountancy Age/Reed Accountancy Personnel Big Question.
The monetary policy committee is expected to announce a lowering of UK rates on Thursday, after holding them steady since last year. This follows a 0.5% cut in US rates to power the slowing economy. ‘A rate cut is required to stimulate economic growth as well as consumer demand and optimism,’ said Chris Baldwin, FD of the Godfrey Hall Group.
The strong pound is often blamed for economic difficulties. One FD found it ‘increasing difficult to compete in Europe, most of our business is there’. A weaker pound would benefit ailing industries. Another FD stated: ‘To assist the manufacturing industry, put a tax on mortgage interest payments to eliminate any saving so as not to overheat the housing market.’ The prices of housing rose 0.1% in January compared to the previous month, according to the Halifax bank.
But some FDs are afraid of what lower interest rates could mean and believe the economy does not need a boost. ‘I’m wary of cutting interest rates or getting into possible ‘boom-bust’ scenarios of the 80s,’ said one FD.
‘Although I am not a Labour supporter, I believe our economy is being run much smoother lately.’
But one FD said aping others was not a solution: ‘We need to tread carefully. If others crash, does that mean we should?’
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