Lloyds TSB: Bank of England had 'difficult decision'

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Lloyds TSB: Bank of England had 'difficult decision'

Thu 10th Apr 2008

The chief economist at Lloyds TSB Corporate Markets has noted that the Bank of England's monetary policy committee (MPC) faced a difficult decision today.

It opted to reduce interest rates by 0.25 per cent to five per cent, but Trevor Williams acknowledged that if the Bank had left interest rates at the same level economic growth could be stifled further, while by lowering rates it has allowed inflation to continue to rise.

He suggested that "in the end, it was probably the stream of economic data published in recent days that tipped the balance in favour of a cut".

Mr Williams also stated that the Bank's recent report on credit conditions "was anything but upbeat" - it predicted that credit is likely to become "both scarcer and costlier".

He forecast that this would be the last rate cut the Bank of England makes in 2008, unless the economic situation degenerates further.

The Intermediary Mortgage Lenders Association would not be pleased with that outcome - it has called for further rates cuts to try and bring down money market rates and restore consumer confidence.

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