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After the unprecedented rate cut by the Bank of England last week, now the question is where does this leave the economy, and what will happen next to Base rate?
The reason given for the large cut was the risk that economic growth could contract sharply and inflation would undershoot the 2% target in the medium term. Labour market data will be published on Wednesday and are forecast to show that companies laid off staff in October at the fastest rate since the early 1990's.This will push up the unemployment rate closer to 6%, a level that we suspect may be breached this winter. With more people on the dole, spending power being eroded and credit conditions still tight for most businesses, the risk is that the last week's rate cut may not be the last.
The worsening profile of economic activity at the start of Q4 suggests that another quarter of contracting gdp is extremely likely in Q4.
With inflation set to fall rapidly during the course of 2009, this should keep the BoE in 'rate cutting mode' over the next few months.
I think that bank needs to take the interest rate at 2% as soon as possible to easing the Economic situation, what do you think?
The reason given for the large cut was the risk that economic growth could contract sharply and inflation would undershoot the 2% target in the medium term. Labour market data will be published on Wednesday and are forecast to show that companies laid off staff in October at the fastest rate since the early 1990's.This will push up the unemployment rate closer to 6%, a level that we suspect may be breached this winter. With more people on the dole, spending power being eroded and credit conditions still tight for most businesses, the risk is that the last week's rate cut may not be the last.
The worsening profile of economic activity at the start of Q4 suggests that another quarter of contracting gdp is extremely likely in Q4.
With inflation set to fall rapidly during the course of 2009, this should keep the BoE in 'rate cutting mode' over the next few months.
I think that bank needs to take the interest rate at 2% as soon as possible to easing the Economic situation, what do you think?