BoE cuts by shock 1.5%

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Posted on Thursday, November 6, 2008 at 02:02PM by

Simon Ward |

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Drastic action was warranted but there is a risk of exhausting interest rate ammunition too soon. The cut will have limited impact unless the financial system starts to function normally. The MPC is hoping to shock money and credit markets back to life but the Fed’s rate-slashing failed to avert a US credit crunch. UK policy-makers may need to consider additional steps to ensure the flow of credit to firms and households, such as TARP-style purchases of private sector debt and an expansion of the small firms loan guarantee scheme.

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