Business group calls for November interest rate cut

Later this week, the Bank of England will once again decide whether or not to change the UK base rate (currently standing at 5.75%).

A few months ago, many experts were predicting a further series of rises to tackle the overheated housing market.

Now, following the "credit crunch" and recent turmoil in the boardrooms of some of the world's biggest banks, there is growing concern that business and consumer confidence may also be on the turn.

Although the results of various business confidence surveys seem to vary widely, the thought of further rate rises seems very unlikely now - with most commentators predicting no change or perhaps a quarter point cut.

Commenting in advance of next week's BoE meeting, David Kern, Economic Adviser to the BCC, said;

“UK annual CPI inflation fell below the 2% target in recent months. Inflation in Q3 was also below the levels predicted in the Bank of England's August Quarterly Inflation Report whilst credit conditions have become tighter since August, both globally and in the UK. It is clear that UK GDP growth, though still strong in Q3, is set to weaken more sharply than was envisaged in the August Inflation Report.

“Against this background, the case for an early interest rate cut is strengthening. Most analysts still believe that the MPC will choose to postpone the necessary cut in rates. A growing number however are now supporting our assessment that an early cut is essential, and should not be unduly delayed. The cumulative increase of five interest rate increases is now squeezing UK personal disposable incomes, and there are clear signs that the housing market is softening. Global risks are again worsening, and there are new concerns over the strength of many international banks."

“The US Fed cut interest rates last week, even though US GDP growth was stronger than expected in Q3. On this occasion, the MPC should follow a similar policy. We urge the MPC to announce a small cut in interest rates on Thursday as further unnecessary delays could cause serious problems in 2008”