Interest rate cuts amid fears of deepening recession

Professor David Blanchflower, a member of the Bank of England’s Monetary Policy Committee, has warned that the UK is in danger of entering a deeper form of recession if interest rates are not cut significantly, as the UK economy simply cannot endure anymore.

An aggressive cut in interest rates is the only thing that can be done to avert the potentially long recession that is falling over the country, argues Blanchflower.

With both business and consumer confidence at such a low, any improvement in the economy will filter very slowly into the corporate and public sector.

The prevailing credit conditions have yet to be fully felt, and growth is predicted to take until 2010 to rebound.

The calls for a further interest rate cut follows on from the move made by the US Federal Reserve yesterday, who have now cut interest rates to just 1 percent, and even then there are still a number of risks being made to economic growth.

Blanchflower has argued that the UK economy is in a very similar state to that of the US and, as a result, the UK should follow suit with a half point reduction next week.

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