Forum Brief: Interest rates

The Bank of England has announced a quarter point cut in interest rates.

The move comes amid fears that a slowdown in house prices, coupled with a possible war with Iraq, could hit economic performance.

Forum Response: Institute of Directors

Ruth Lea, head of the policy unit at the IoD, said: "We welcome today's cut in interest rates. There is no doubt that economic clouds are gathering; a possible war with Iraq is draining confidence and the markets are very jittery and bearish.

"Recent economic news has suggested that the world economy continues to deteriorate and this is especially difficult for the manufacturing sector, which has been in recession for nearly two years. Moreover consumer spending and the housing market, the parts of the economy that underpinned growth last year, do now seem to be moderating."

Forum Response: Council of Mortgage Lenders

Michael Coogan, director general of the Council of Mortgage Lenders, told ePolitix.com: "The decision to cut rates is likely to have been triggered by a desire to sustain confidence in the broader economy at a time of political uncertainty. But it is unlikely to herald a further round of aggressive interest rates cuts.

"The cut may be a short term bonus for borrowers, but the uncertain longer term outlook reinforces the message that they should avoid over-commitment. A slowdown in the housing market is still expected during 2003, but this rate cut will reinforce the attractiveness of home-ownership and its affordability in the coming months."

Forum Response: Business Services Association

Norman Rose, director general of the BSA, told ePolitix.com: "Today's cut in interest rates will give a welcome boost to the economy as a whole and will help to decelerate the slowdown.

"It is likely to have a positive effect on employment prospects as cheaper borrowing encourages new investment in equipment and projects. In particular, it should prove beneficial to the development of PFI by reducing the cost of procurement and encouraging the flow of new initiatives."

Forum Response: Construction Products Association

Jean Emblin, external affairs director at the Construction Products Association, said: "We are delighted to hear that the Bank has cut interest rates, an unexpected but shrewd move.

"In such uncertain times the Bank's decision will ease the current pressure on manufacturing and allow UK companies to begin addressing the current trade imbalance. In contrast to other parts of manufacturing, investment by construction product manufacturers has continued to grow and this much needed boost to manufacturing will help our industry's commitment to increased productivity."

Forum Response: British Retail Consortium

Bill Moyes, director general at the BRC said: "At last the MPC have listenned to the BRC. This cut was neccessary for see consumer spending continuing to grow at the moderate levels that the governor wants. Our inflation figures released today showed that shop price deflation, slowing demand and ever tightening margins mean that the retail sector's ability to create jobs and drive the economy is under threat and the cut was totally justified to stimulate the neccessary demand."