BSA voices caution against further rate cut

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BSA voices caution against further rate cut

Tue 3rd Mar 2009

The Building Societies Association (BSA) has warned that the Bank of England should think twice before cutting the base rate again.

The central bank's monetary policy committee (MPC) meets later this week to decide what to do with the interest rate, which currently stands at one per cent after a series of cuts.

With the economy still struggling, there is widespread conjecture that the group will decide to cut rates by another quarter or even half a per cent in a bid to stimulate growth.

But the BSA claimed the move would have little effect on the UK economy and would be bad news for savers and borrowers, as lending institutions would see their saving inflows decline.

"If the Bank of England wishes to make a contribution to a recovery in the housing and mortgage markets, it should not cut interest rates this month. We need to encourage an increase in the flow of funds into the mortgage market, not take steps that would further restrict that flow," explained Adrian Coles, director general at the BCA.

A recent poll of analysts by Adfero saw nine out of 11 predicting the bank would cut the base rate this week, despite the fact the rate is already at an all-time low.

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