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Thursday, 6 November 2008

Will a 1.5% interest rate cut do the job?

Today the Bank of England dropped its usual "steady as she goes" image to make a dramatic (and larger than anyone even asked for) rate cut to bring the Bank Base Rate down to 3%.

But as Mervyn King bends over the twisted body of the British Economy, shouts "Clear!" and applies the defibrillator, will it be enough to restart its bruised and battered heart?

If the rate is passed on (and quickly) to mortgage payers and businesses, it might just get people thinking that they can afford to go out and get some Christmas presents in, helping out the retail sector.

Again, if rates are passed on, and the banks are prepared to lend (big ifs), this could be a great time for all of those first-time buyers who have not been able to afford to get on the housing ladder to take advantage of cheap house prices and low interest rates - giving a boost to the construction industry.

Combined with a new president, and a new found optimism, in the US, maybe things won't be that bad after all.

Or am I clutching at straws.

What does everyone else think? Please leave a comment.

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