The Confederation of British Industry, the nation’s top business lobby, said the central bank should slash its benchmark interest rate in November by the most in seven years to halt a recession.
“Our members are having a tough time,” Richard Lambert, director of the CBI, told reporters in London. “There’s scope for a half-point cut in November,” assuming the inflation outlook doesn’t change. “We are now almost certainly in a mild recessionary phase.”
The Bank of England has kept its main rate at 5 percent since April on concern that the fastest inflation in at least a decade will become embedded in the economy. The European Commission says the U.K. has already entered its first recession since 1991 after growth ground to a halt in the second quarter, ending the longest stretch of uninterrupted expansion in a century.
(Article continues below)
Lehman Brothers Holdings Inc. plans to file for bankruptcy protection and Merrill Lynch & Co. agreed to sell itself this weekend, adding to the risk of further deterioration in Britain’s financial services industry after the yearlong credit squeeze. The Bank of England pledged today to “take appropriate actions if necessary” to stabilize money markets.
The central bank, which hasn’t cut its key rate by more than a quarter point since the aftermath of the September 2001 terrorist attacks, should reduce its benchmark to 4.5 percent this year and to 4 percent in early 2009, the CBI said.