“Too late and too little, but welcome nevertheless,” was how BHF Group welcomed the pre-Christmas interest rate cut.
Michael Weedon, communications director of the retail trade association, went on to say: “On its own it will be sufficient neither to revive sagging consumer confidence, nor to avoid the danger of a full recession. There need to be more cuts, soon. The Monetary Policy Committee is obviously worried enough to bring forward the first of their reductions. Why wait any longer?”
BHF Group is not convinced that the reduction will have time to have any impact in the short period left before Christmas. Many with mortgages will not see any benefit until some time in the new year, if at all, it says.
The trade association also has growing doubts about the significance of the bank rate itself. With interbank lending rates reaching nine-year highs at the end of November, the gap between the headline rate and the rate at which banks lend to and borrow from each other has grown enormously.
BHF Group says the credit crunch remains real, and cuts by the central bank are in danger of losing their effectiveness in controlling the real cost of credit to the consumer.
“I hope we’re wrong about this,” said Weedon, “because the success or failure of retailing in 2008 could be riding on it.”