The Bank of England’s decision to cut interest rates today (Wednesday) by 0.50 per cent was welcomed by the British Retail Consortium (BRC) as the kind of decisive action needed amidst the current financial turbulence.
The UK move puts the interest rate at 4.5 per cent from five per cent. The US Federal Reserve has cut rates from two per cent to 1.5 per cent and the European Central Bank (ECB) trimmed its rate from 4.25 per cent to 3.75 per cent.
On the UK decision, Stephen Robertson, BRC director general, said: “This bold action by the Bank of England is the right decision and will be welcomed by hard-pressed customers and retailers.
“The banking crisis is undermining consumer confidence and a significant rate cut was necessary to restore confidence while stimulating the High Street and the rest of the economy.
“The slowdown will act as a downward pressure on prices. Commodity prices are falling rapidly which will ease operating costs and so inflation should fall sharply,” said Robertson.
“It takes months for the benefits of a rate cut to filter through so cutting rates today will avoid the need for a bigger cut later on. This should only be the start of a series of reviving rate reductions.”
Lloyds TSB also welcomed the news. Agriculture director Paul Spencer said: “This drop in the cost of borrowing is a real boon to farmers who have seen input costs rise dramatically during the past year. Paying for fertiliser in August 2008 rather than June 2009, and at a cost of up to three times higher than this time last year, has made 2008 an exceptionally tough year for many.
“Regardless of the sector they operate in, all farmers have had to deal with increasingly high costs for essential commodities. And with many also facing the prospect of substantial tax bills in the New Year, today’s cut in interest rates will provide some welcome relief.
“Looking to the future, we believe that further interest rate reductions can be expected which will help to restore consumer and business confidence and further reduce some of the financial burden currently facing the UK’s agriculture sector,” said Spencer.
“Markets remain volatile for all commodity crops produced by farmers. In this challenging market, it’s a good idea to understand the exact cost of production so that you know when to sell.”
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