One member of the Monetary Policy Committee, which is involves in cutting rates, has recently called for major cuts to the UK’s base rate in order to avoid an economic slump that could last for a long period of time. The warning comes from MPC member David Blanchflower, who has been consistently voting for a rate cut over recent months at the monthly MPC meetings. However, having been outvoted rates have remained at 5% for the past five months.

With warning that the UK is heading swiftly towards recession Blanchflower stated: “The fears that I have expressed over the last six months have started to come to fruition. I’ve obviously voted on quite a number of occasions now for small cuts but we need to act and we probably need to act in larger amounts than that. We need to actually get ahead of the game and it appears that we are now behind.”

A number of officials have predicted that rates will fall a number of times over the coming twelve months, and one industry expert said: “There are clearly signs that they are moving in that direction fairly slowly. Yes, rates probably should have started to come down by now but I can understand the uncertainty around that and why, as a central bank, they would want to err on the side of caution.”

Blanchflower went on to state: “We are going to see much more dramatic drops in output. The way to get out of it is to act, by interest rate cuts and fiscal stimulus and other things to try help people who are hurt through this. Sitting by doing nothing is not going to get us out of this and hoping that a knight in shining armour will come and lift us out of this is optimistic in the extreme.”

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