Further interest rate cuts?


David Blanchflower, policy maker at the Bank of England has voiced his concern that if interest rates do not fall "soon and significantly" we could be facing the prospect of a relatively deep and long-lasting recession.

The Federal Reserve slashed US interest rates to 1% on Wednesday in the hope of restoring order to the battered credit markets.

David Blanchflower has been arguing in favour of lower borrowing costs for most of the past year and believes in hindsight that the monetary policy has not been sufficiently forward looking.

Chief economist Jonathan Loynes said: "Extraordinary circumstances require extraordinary actions. With the current recession likely to be deeper than that in the early 1990s and the credit crunch impairing the effectiveness of monetary policy, we now expect UK interest rates to fall to an all-time low of just 1pc."

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