Tweet
David Kern, economic adviser to the British Chambers of Commerce (BCC)
"The new MPC minutes, and the alarming messages conveyed by governor Mervyn King in his speech to Leeds Chamber of Commerce, highlight the big risks facing the UK economy. The minutes acknowledge that the threat to growth has worsened sharply, while inflation is set to fall after its current peak.
"We strongly believe that a further cut in interest rates to 4% in November would be an important step aimed at alleviating the severity of the recession and to help restore business and consumer confidence."
Vicky Redwood at Capital Economics
She believes that October's MPC minutes echo the "gloomy tone" of Mervyn King's speech last night and suggest that the committee will continue to act aggressively in cutting rates.
"Not only did all members vote for the 50bps cut, but the discussion was unambiguously dovish. The case for leaving rates on hold (or indeed cutting by 25bps) wasn't even discussed, with the balance of risks to inflation judged to have shifted decisively to the downside," she said.
"The committee noted the substantial deterioration in the outlook for economic activity. And it even sounded fairly cautious about how much good the government's bank recapitalisation would do the economy in the near-term. Lastly, there was talk in both the minutes and King's speech about the growing risk of an undershoot of the inflation target. A November rate cut is looking pretty certain, with a good chance that it's another 50bps. And we see rates getting to 2.5% or lower next year."
Howard Archer at Global Insight
"The tone of the minutes are very gloomy, noting that the outlook for UK economic activity had deteriorated substantially, the prospects for main export markets had worsened and credit conditions were extremely tight. As a result, the MPC were clearly concerned that an extended, deep economic downturn and faster rising unemployment could lead to inflation undershooting its 2.0% target over the medium term.
"A plethora of recent very weak data and survey evidence leaves little, if any, doubt that the UK is now well on its way into recession, thereby intensifying pressure on the Bank of England to cut interest rates aggressively further."
George Buckley at Deutsche Bank
Buckley said that the tone of the conclusion and summing up in these minutes is "overwhelmingly bearish" about economic growth and clearly less concerned about implications of high current levels of inflation.
"They are a lot more concerned about inflation undershooting its target in two years' time. When we come to see the inflation report at the start of next month, it will show inflation falling quite rapidly," he said.
"They'll be more confident that inflation will fall rapidly and that we won't see these second round effects which have been one of the risks they have been identifying."
James Knightley at ING
"They acknowledged that it is difficult to gauge how far rates would eventually need to fall, but there was clearly sufficient information to justify a 50 basis point move.
"We continue to look for further aggressive moves in coming months as the activity numbers weaken and inflation starts to fall sharply (the petrol price war is a clear help here).
"Our base case is currently that the policy rate will be cut to 2.75% in the first half of 2009, but the risks are skewed to the downside given we look for four consecutive quarters of negative GDP growth."
guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds
More...
