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Economy 'set for boost when banks start to lend'

Economy 'set for boost when banks start to lend'

Category: Loans

Updated: 05/12/2008
First Published: 05/12/2008

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The Bank of England's interest rate cut is set to boost the UK economy, it has been suggested.

According to Charles Davis, economist at the Centre for Economic and Business Research, a "fair number" of banks have been passing on cuts, despite some failing to do so.

Secured loans holders set to be benefit from this, he noted, although lenders are not yet providing credit at a level that matches their deposits.

"While they are trying to reduce their debt levels and risks on the balance sheet, they are remaining very cautious in their lending, which is what is holding the economy back," Mr Davis explained.

Yesterday the Bank's monetary policy committee voted to reduce the official base rate from three per cent to two per cent.

It stated that the decision came partly as a result of falling inflation, with the slowing of the consumer prices index rate to 4.5 per cent suggesting that it may soon fall below the two per cent target.

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