Business welcomes interest rate cut

Business groups have applauded the Bank of England’s decision to cut interest rates from 5.25% to 5%, amid growing concerns over the volatile financial and economic climate.

The rate reduction, which was widely anticipated by analysts, means that UK interest rates have now been revised on three occasions since early December.

The central bank hopes the latest drop will inject life into the country’s ailing economy and boost consumer confidence as the global credit crisis deepens.

Richard Lambert, Director-General of the Confederation of British Industry, has welcomed the decision: ‘This cut was badly needed, and will be welcomed by a business world that is feeling the pressures of the credit crunch and of slower growth.

‘Higher interbank and mortgage lending rates are dampening investment, consumer demand and economic activity, and [this] cut should ease conditions a little.’

However, the British Chambers of Commerce warns that ‘undue delay in acting threatens to reduce the effectiveness of interest rate cuts’ that had already been forecast.

Meanwhile, some experts believe the 0.25% rate reduction to be in line with economic forecasts originally set out by the Bank.