HEAR, HEAR: The International Monetary Fund urged the Bank of England to cut rates and the U.K. government to step up public investment and relax its austerity measures to head off permanent damage to Britain’s economy.
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THE BACKGROUND: Earlier this week, the IMF cut its forecast for U.K. gross domestic product growth this year to 0.2 percent, down from the previous estimate of 0.8 percent. For next year, the forecast was cut to 1.4 percent from 2 percent. The British economy has been essentially flat since late 2010.
THE CURE: The IMF suggested that the Bank of England may need to cut its base interest rate even lower than 0.5 percent, the all-time low which has been in place since March 2009. The Bank of England’s rate-setting Monetary Policy Committee has considered lowering its base rate, most recently this month, but decided not to change.
