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Latest base rate cut is "virtually meaningless"

Latest base rate cut is "virtually meaningless"

Category: Loans

Updated: 09/03/2009
First Published: 09/03/2009

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The most recent base rate cut is unlikely to have a significant effect on the UK economy, an expert has argued.

Last week the Bank of England halved the rate, bringing it to 0.5 per cent and marking the lowest it has been in the institution's 315-year history.

But head of advice at Hargreaves Lansdown Danny Cox suggested that the measure is unlikely to achieve the desired results.

Describing the move as "virtually meaningless", he said: "Going from one per cent to half a per cent is so small it signals that the previous cuts haven't worked properly."

The six consecutive reductions may have led to cheaper interest payments for consumers with secured loans , but Mr Cox stated that the rate is unlikely to be brought any closer to zero per cent.

Instead, he explained, the Bank will need to rely on quantitative easing to stimulate the economy - a tactic it has now turned to with the announcement of a £75 billion asset purchase.

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