Rate cut calls grow
Bank of England monetary policy committee (MPC) member David “Danny” Blanchflower warned two million Britons could be out of work by Christmas as he urged the central bank to cut interest rates.
Blanchflower, who has voted for a rate cut at the past eight monthly MPC meetings, said yesterday that a cut of more than 25 basis points was needed, in order to prevent the UK economy slipping into a prolonged recession.
His unemployment forecast would mean more than 330,000 people losing their jobs in the second half of this year.
“The fears that I have expressed over the last six months have started to come to fruition,” he said, speaking ahead of next week’s rate-setting MPC meeting.
“We need to act. We need to actually get ahead of the game and it appears that we are now behind,” Blanchflower added.
About 80 per cent of traders on the interest rates futures market are now pricing in interest rate cuts, compared with just 60 per cent last week, after a raft of gloomy data released in the past seven days has increased the belief that the UK economy is slipping into recession.
The pound has fallen strongly against the dollar due to the expectation of interest rate cuts. Yesterday, it hit a fresh two-year low.
Blanchflower, a US based academic who has often been a lone voice on the MPC in calling for lower rates, said Britain could learn from the action of the Federal Reserve and interest rates should be substantially lower than the current five per cent.