Lower interest rate needed to boost UK economy

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Lower interest rate needed to boost UK economy

Thu 6th Mar 2008

The British economy needs an interest rate reduction - but it will not get one yet, a leading economist has said.

Jonathon Loynes, head of European economics at Capital Economics, told Channel 4 News that he was not surprised that the Bank of England held interest rates at 5.25 per cent this month, although he feels that they need to be lowered..

He noted that the housing market is slowing down and said interest rates are currently at fairly high levels "by international and recent historical standards in the UK".

Mr Loynes predicted that the Bank would "proceed cautiously" and bring interest rates down slowly, because of concern about rising inflation.

However, he warned that there is a danger that if the Bank of England decreases interest rates too gradually then the problems in the economy could escalate.

Earlier today the Royal Institution of Chartered Surveyors said it expected the interest rates to remain the same until May.

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