Member Article

Rates cut pleases North East

The Bank of England’s rate-setting committee has cut interest rates to 5.25% from 5.5% amid signs that the UK economy is slowing down. Analysts had widely predicted the move, which followed recent cuts in the US, where the Federal Reserve has reduced its borrowing costs to 3% from 4.25%.

Richard Bottomley, president of the North East Chamber of Commerce and senior partner at KPMG in Newcastle, said: “Businesses in the region will welcome news that the Monetary Policy Committee is continuing to take proactive steps to keep the UK economy on an even keel. Whilst we are not surprised, we are pleased that the Bank is ensuring confidence remains high.

“For a while now, North East businesses have responded robustly despite grim news from the US and the latest rate cut will continue to aid exporters and manufacturers. As a region we are performing well and NECC is keen to see that positive picture continue.”

Wendy Lee, commercial director at Newcastle Building Society, said: “This cut is obviously good news for home owners and buyers, and especially for those 1.4m people who are coming off low rate fixed term mortgages this year, for whom every reduction makes a big difference.

“And whilst a cut is not normally good news for savers, the fact that there is intense competition amongst banks and building societies to attract savers will mean that there will still be a lot of good deals and products available to them.”

Sarah Green, Regional Director of the CBI, said: “The Bank’s own forecast in November suggested that two rate cuts of 0.25% would be required to meet its inflation target in 2009, and today’s cut brings the base rate down towards a more neutral position. This should help ensure that there is a soft landing to the slowdown now underway.

“Looking ahead though, the Bank must balance the effect that cutting rates while inflation is rising might have on its credibility, with the likelihood that further out the slowing economy will have brought inflation back below the 2% target.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .