Local and national reactions to the decision to cut interest rates to 2% ...

Frank McKenna, chairman of lobby group, Downtown Liverpool in Business:

“I think it’s clear now that the Government and the Bank of England are doing everything they can to revive the economy.
 “But we also have to remember that it was only four months ago that some experts at the Bank were considering interest rate rises to combat inflation. So you have to question the competence of some and hope this latest action isn’t just too little too late.
 “What I think we need now is a period of stability. I would be the first to say that is was the actions of the banks that got us into this mess in the first place but we now have to give them some time to rebuild their businesses.
 “There is talk of further interest rate cuts but what I don’t think we want to see the return of is lending becoming too cheap again. We need to get away from their era of reckless lending.”

Neil Blankstone, of Liverpool stockbrokers Blankstone Sington:

“This move certainly puts money back into peoples’ pockets but the key factor here is what it will do to the LIBOR rate (the rate at which banks lend to eachother).
 “We are probably not going to get a proper steer on that until February next year when the banks reporting season comes around again and we get to discover the level of write-offs.
 “The Government is trying to get the banks to start lending at normal levels again to small businesses. But the problem is that the banks’ lending models have been smashed to pieces and so that isn’t going to happen until they can start to rebuild them.”

Christopher Clay, investment director at Liverpool wealth management firm, Rensburg Sheppards:
 
“The stock market remained rangebound shortly after the Bank of England cut interest rates by the widely expected 1% to 2%.
 “This level of interest rates match the lowest level since the Bank was founded in 1694 and highlights the seriousness of the situation facing the economy.
 “You can see it in the high street with aggressive pre-Christmas sales, increasingly dismal economic data, job losses, and continued uncertainty in stockmarkets, property prices still tumbling and mounting worries over deflation.
 “While it is true rates in the UK can still fall further the effectiveness of this response to falling demand has been reduced by the banking crisis with bank lending still severely restrained.
 “Although the economy has been stimulated by the sharp cuts in interest rates, the fall in exchange rate, and the Pre-Budget Report’s fiscal boost. The question on everyone’s lips is that can policymakers do enough to prevent the downturn in the economy turning from a serious recession into a prolonged depression?
 “Nevertheless, the cut does provide hope to those struggling with mortgage payments, as long as mortgage lenders pass them on.” 

Neil Sturmey, managing partner of Grant Thornton, Liverpool:

"Under intense pressure from all angles including the manufacturing industry, financial services sector, retailers and banks, the Bank of England has had no option but to continue slashing interest rates. Today's 1% cut is no surprise as the Bank of England works frantically to put the economy back on a steadier albeit slow and uncertain road.

"It will take many months before the full effect of the last few month's dramatic cuts feed through to consumers and help steer the UK economy out of what is predicted to be a long and deep recession. These interest rate cuts, combined with last week's massive fiscal injection by the Chancellor, are the first steps on the way to restoring much needed confidence but the economy still has a long way to go."

"As unemployment figures grow to more depressing heights, share prices remain volatile and the pound continues to plummet, the MPC will have to think long and hard on how to use their economic acumen to turnaround this economic land lock."

Les Staniforth, corporate finance partner at Liverpool accountants Duncan Sheard Glass:

"The 1% cut has to be good news for the economy and in particular for exporters where Sterling’s continued weak rates cannot harm their prospects. However the worldwide lack of positive consumer sentiment and uncertain job security will take a significant time to turnaround and will not be removed overnight."

Barry Flynn, Liverpool senior partner at Ernst & Young:
 
“As was the case last month, it was almost certain that interest rates would be slashed, but the big question was by how much.
 “The Bank of England has given the economy the right medicine at the right time.
Anything less than a 1% cut would have been a missed opportunity. This recession is gathering pace and another significant boost was desperately needed.
 “Manufacturing and services surveys this week have confirmed that the recession is gathering momentum and that in the current quarter the economy will almost certainly contract by more than the 0.5% seen in Q3.”

Brian Clark, senior partner at PricewaterhouseCoopers in Liverpool:

“We welcome the decision today by the Bank of England to make a further significant cut in base rates, which should provide help for both individual and corporate borrowers.
 “But interest rate cuts take around a year to have their full effect on economic growth, and there will also be some losers amongst savers, so it would be wrong to expect a quick turnaround in the economy as a result of this move.
 “Decisions by the banks on the volume of lending will also be at least as important for the economy as today's decision to cut the cost of loans.”

Ian Goalen, office senior partner at KPMG in Liverpool:

“The battle against deflation is on. Rates are set to fall further - and soon, as policymakers try to counteract the powerful contractionary forces at work in the economy.
 “However, it is unlikely that low interest rates alone will achieve the desired result and the UK may well have to follow the US with unorthodox measures, such as buying up mortgage and commercial debt, to free-up lending and re-liquefy the financial system.”

Andy Brown, managing director at The Delivery Practice:

“The rate cut is welcome and will hopefully go some way towards levelling off the economy. But it does demonstrate the critical condition the economy is in and I expect rates to continue to fall, possibly even as low as the 0% level seen in Japan.
 “The Bank of England know that as the economy slows and unemployment rises deflation becomes a big risk. A rate cut was necessary to prevent a further fall in the cost of goods and services and to encourage further spend and economic growth.
 “The key question for SME businesses is how much of the cut is past on to them?”

David Cavell, banking adviser to the Forum of Private Business (FPB):

"This further cut in the rate of interest is pleasing. I certainly hope that it will be very quickly reflected in both market rates and in the cost of borrowing being offered by banks to small businesses."

Stephen Robertson, British Retail Consortium director general:

“This is exactly the type of decisive action we need during these uncertain times. With the threat of inflation fading, the Bank of England is right to concentrate on jump starting the economy.
 “Decisions now will greatly influence how long and deep the recession is.
 “Retailers are passing on VAT cuts and going further with big discounts of their own to help hard-pressed customers. The Bank’s job is not done. It must continue to cut rates in the New Year to get the economy heading in the right direction again.”

Edward Menashy - chief economist at Charles Stanley:
 
“It is now generally accepted that the UK economy is in the midst of the weakest quarter of the current contraction and further interest rate reductions may be required in the course of 2009.
 “Private investors have been pushed into the gilt market because deposit rates have shrunk and are set to reach yet lower levels and inflation is expected to decline sharply with the prospect of reaching -2% in the third quarter of 2009.”

Neil Chegwidden, head of residential research at Jones Lang LaSalle:

“Quite bizarrely, given the 1.5% base rate cut last month and the various giveaways in last week’s Pre-Budget Report, today’s base rate cut will still be seen as a much needed boost and comfort to Britain’s beleaguered households and homeowners.
 “The rate cut will also be welcomed by the housing industry and will provide yet greater incentive for first-time buyers to step onto the property ladder.
 “The Bank of England’s latest move will not solve all our housing woes but it does sow the seed of hope, especially looking towards next year. The magnitude of the cut is an additional boost for the housing market.”

Graeme Leach, chief economist at the Institute of Directors:

“The MPC still has some ammunition left but not a lot. We can expect further rate reductions early in 2009 but then the MPC will have exhausted its interest rate armoury.”

James Knightley, economist at ING Bank:

“There will be intensifying pressure on the Bank to cut rates even further and there is the very real risk that Bank Rate will actually end up at zero next year. With UK inflation posing no threat, all options can be considered.”