Interest rate cuts do not impress all

Following the most recent Monetary Policy Committee meeting earlier this month the Bank of England announced that it was cutting the base interest rate for the fifth time in a row, taking it to a new historic low of just 1 percent, which is the lowest in the history of the Bank of England.

The government has been hoping that cutting the base rate to such a low level, coupled with other measures such as VAT cuts, will help to boost consumer spending, improve the economy, and minimise the damage caused by the recession.

However, whilst many homeowners might be pleased to see the interest rate come down because it means that their monthly repayments might also come down , there are others that are not so pleased with the base rate cuts. Savers, for example, have been hit hard over recent months, as the base rate has continued to fall, and with the base rate now having fallen to fresh lows many savers could find that they are earning little or nothing on their savings.

There are also some industry groups that are not particularly impressed with the base rate cut, such as the Federation of Small Businesses, the majority of members of which said that they would have preferred the government to do something to improve access to finance rather than to cut the base interest rate, which they did not think would particularly help to boost the economy.

An official from the Federation of Small Businesses said: “These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required.”

He said that over 60 percent of members wanted rates to stay on hold and improved access to funding instead.

Tags: bank of england, consumer, low level, desired effect, interest rate cuts, funding, lows