INSTANT VIEW-BoE cuts rates to 1.0 pct as expected

Thu, Feb 5 2009, 12:21 GMT
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LONDON, Feb 5 (Reuters) - The Bank of England cut interest rates by 50 basis points on Thursday, taking rates to a record low of 1 percent.

Analysts had predicted the move after recent surveys suggested the economy continued to contract at the start of the year.

Following are reactions from business groups and economists to the decision.

STUART PORTEOUS, RBS GROUP ECONOMICS

"Today's 50bps cut sends a clear message -- putting a floor under the fragile economy remains priority number one, the UK's eight million net savers will have to play second fiddle for now. The Bank is quickly running out of wriggle room on rates. Other weapons in the Bank's arsenal are now being readied for the offensive -- buying assets first, printing money second."

JANE MILNE, BRITISH RETAIL CONSORTIUM

"Interest rate cuts are not the only tool to fix the recession. The key issue now is not the cost of credit - but its availability.

"The Bank of England faces a fine balancing act between further weakening sterling and attempting to revive the economy. What we need now is better access to credit and a boost to consumer confidence."

IAN MCCAFFERTY, CBI CHIEF ECONOMIC ADVISOR

"This drop in rates should support business confidence and, when added to recent cuts of the past couple of months and the fall in the pound, provides a very significant stimulus to the ailing economy.

"But at these very low levels of interest rates, and with the credit mechanism still impaired, it is vital that the Bank swiftly supplements today's move with direct intervention in the corporate lending markets.

"Sterilised intervention will help ensure that business is able to obtain the credit it needs to ride through these difficult times, without increasing the money supply. The real problem is not the price of credit, but its availability."

DAVID KERN, ECONOMIC ADVISER, BRITISH CHAMBERS OF COMMERCE

"With the recession worsening, and deflation a distinct risk, there is still scope for further interest rate cuts in the next few months, to almost zero.

"But, with rates at very low levels already, the focus of UK monetary policy must now inevitably shift towards forceful quantitative and credit easing measures, with the aim of increasing the money supply and removing blockages in the credit markets.

"Given the Bank's unduly cautious record in the early stages of the credit crisis, UK businesses must be reassured that the Bank will be prepared to implement unconventional techniques. This is vital in order to alleviate the recession, counter threats of deflation, and underpin falling confidence."

Keywords: BRITAIN BANK/RATES

(UK Economics desk, uk.economics@reuters.com, Tel: +44 207 542 5109)

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