Professor David Blanchflower a member of the Bank’s Monetary Policy Committee (MPC), has spoken out claiming that the financial meltdown we are experiencing at present may be longer and more far reaching than the 1929 stock market crash. He is advocating a big cut in interest rates and he may well get his wish today. Often in the past he has been a lone voice in support of continued cuts, often dubbed the “Dove” for his stance.

The last cut was 0.5% dropping rates to 4.5%, as part of the concerted effort to get banks lending again and stimulate growth in conjunction with the ECB and Fed.

Blanchflower believes that delays in making these cuts have damaged the economy and that the MPC has been focused too much on controlling inflation which will now drop significantly as a result of world problems not as a result of anything that the MPC has done.

So we may expect a rate cut of another 0.5%, whereas we really need something in the region of sustained monthly 1% cuts.

In addition to the cuts we need the banks to pass those cuts on to mortgage customers instead of using the additional margin to prop up their own balance sheets.   

He also said a range of surveys of UK economic activity had shown a marked downturn since last summer.

“It is not sufficient to consider the data month by month until it emerges that the UK is in recession.

“I believe this trend has been apparent for some time. The synchronised downturn in so many business surveys should have led us to realise sooner that the UK economy was entering a recession.”

America has been bold with it’s cuts and the markets there are starting to respond. If we delay here the MPC will rightly have to share their part of the blame for contributing to and then exacerbating the downturn.

If you have a housing problem as a result of a mortgage that you cannot pay, please call a Help With Debt Advisor for help and assistance.

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This entry was posted on Thursday, October 30th, 2008 at 9:11 am and is filed under Recession. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.