Eddie Holds Steady over Interest Rates; AS BANK CHIEFS FACE CLAMOUR FOR A FURTHER CUT

Daily Mail (London), October 17, 1998 | Go to article overview

Eddie Holds Steady over Interest Rates; AS BANK CHIEFS FACE CLAMOUR FOR A FURTHER CUT


Byline: JOHN DEANS

BANK of England governor Eddie George is refusing to be rushed into following America's lead by cutting interest rates again.

City share values initially soared by [pounds sterling]24bil-lion yesterday after the United States Federal Reserve eased fears of a recession by lowering its base rate a quarter point to 5 per cent.

The surprise move triggered speculation that another half per cent would be lopped off the UK rate, bringing cheaper mortgages and loan charges. MPs and business and union leaders urged swift action to help industry. But ministers refused to pressure the Bank's monetary policy committee, and insiders said Mr George's response was likely to be measured.

With new Treasury economic forecasts due later this month, Whitehall officials believe the committee is unlikely to consider another cut until its next scheduled meeting on November 4 and 5.

Later, share prices fell back amid concern that the U.S. move could be regarded as a panic reaction to the worsening international situation.

The FTSE closed the day up 76.8 points at 5133.1.

Urging the Bank to follow the U.S.

lead, Roger Lyons of the Manufacturing Science and Finance union described Mr George's position as 'increasingly ridiculous'. He said: 'An emergency meeting should be called for next week to cut interest rates by 0.75 per cent to repair the damage the Bank has done to British manufacturing.' The CBI adopted a similar line. Its economics director Sudhir Junankar said the U.S.

move 'sends a clear signal on the future trends for rates worldwide, and improves the prospects for a further cut at home next month'.

Shadow Chancellor Francis Maude warned that Britain was on the brink of recession. 'We need action now,' he declared.

'The Government must come to the Commons with an emergency statement.

'The situation is getting graver by the day, with factories closing, manufacturing in decline and a job lost every ten minutes.' However, the Treasury brushed aside the criticism, stressed the Bank's independence on monetary policy, and pointed up the latest borrowing figures as evidence that Mr Brown's policies are paying off. …

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