Rate cuts 'will improve confidence'

News Category: Management

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The Bank of England's assertive moves to tackle the economic downturn by sharp interest rate cuts will boost confidence but can't hide the UK's slump into recession, an expert has said.

Vicky Redwood, UK economist at Capital Economics, said confidence in the markets will improve if policy makers pull out all the stops to try and help the economy.

She also predicted that interest rates could fall to at least one per cent and possibly lower - a move which would give landlords access to more affordable buy-to-let mortgages.

Stock market traders will be reassured that interest rates are set to fall sharply, but there is no escaping the fact that the UK is heading for a deep recession, Ms Redwood said.

Previously, the Bank has not cut interest rates so sharply because of concerns of inflationary pressures, she noted.

"As long as it moves aggressively now then that should help to prevent a very deep recession," Ms Redwood added.

Interest rates are now at three per cent after the Bank's monetary policy committee yesterday voted for a 1.5 per cent reduction.

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