The Bank of England today reduced interest rates by a percentage point to 2%, noting the economic downturn has gathered pace.
Consumer spending and business investment have both stalled, the Bank said, while inflation and cost pressures have also eased, meaning unless rates are cut inflation could be undershot.
Last month, the Bank cut rates by 1.5%, down to 3%. Now rates are at a level not seen since 1951.
The British Retail Consortium said the decision is the right one and should help consumers and boost the economy.
Director general Stephen Robertson said: “This is exactly the type of decisive action we need during these uncertain times. With the threat of inflation fading, the Bank of England is right to concentrate on jump starting the economy.
“Decisions now will greatly influence how long and deep the recession is.”
But he said the Bank must continue to cut rates in 2009 in order to further stimulate the economy, even though the government has reduced VAT.
Christie & Co head of retail Tony Evans added: “This latest cut will hopefully act as a further stimulus to generate growth in the economy and compel banks to increase their lending to businesses.
“It is vital that they now pass this latest cut on to companies to help them weather the current downturn.”
