The Institute of Directors said yesterday that there is scope for the Monetary Policy Committee to c...
The Institute of Directors said yesterday that there is scope for the Monetary Policy Committee to cut interest rates from 5.25% to 5%.
Although there is resolute consumer spending and a booming housing market, the IoD claims that other issues should be looked at.
The IOD grants that consumer spending is firm, consumer credit buoyant, the housing market is warm, the labour market is tight and public expenditure is picking up. But on the other hand the IOD points out that overall GDP growth has slowed substantially and manufacturing is effectively in recession suffering from the weak euro/strong pound and weakening overseas market.
The IOD stressed there might be tentative signs that the US has reached trough levels and is now facing the upturn of the U shaped recovery, however further economic difficulties cannot be ruled out. So far, the economic performance of Germany and other Euroland economies were disappointing.
Inflationary pressures are contained and pay settlements remain modest despite the tight labour market.
Ruth Lea, Head of the Policy Unit at the IoD said: "Economic growth has decelerated significantly this year and manufacturing is beset by problems including the weak euro and depressed overseas markets. But, set against this, there is a significant fiscal stimulus in the pipeline and consumption is firm. The economy is badly out of balance and the Monetary Policy Committee faces a real dilemma. But we believe that a further 0.25% cut would be safe and would not re-ignite inflation. There is scope for a 0.25% cut this week."
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