Interest rate cut will bring 'little relief' to city

THE Plymouth branch chairman of the Federation of Small Businesses has said today that the Bank of England’s historic move to slash interest rates to just 1.5 per cent will bring ‘little relief’ in the recession.

Richard Thomas told The Herald that the BoE move to cut interest rates from two per cent to 1.5 per cent – the lowest since the Bank was founded in 1694 – is 'good' but he wondered if it would make any difference to the consumer.

The cuts were announced at lunchtime. Richard Thomas said: “From a small business perspective, it is always good to see interest rates falling – but the reality in January 2009 is that business levels now depend on consumers having the drive to go out and spend money.

“While consumers are taking a defensive stance – saving for a rainy day and keeping hold of their money – that is no relief for businesses, small or large.

“In my opinion, then, the interest rate cut is neutral news because the future of the economy is about consumer sentiment. Hearts and minds are now the issue. Is a 0.5 per cent cut going to give more confidence to consumers?”

Some business leaders will be disappointed as they were looking for an even bigger move to combat a worsening recession.

For a full report on how the latest interest rate cut will effect the city's economy see Friday's edition of The Herald.