The National Institute for Economic and Social Research says GDP shrank 0.2% in the three months to September, the first contraction for a calender quarter since 1992. The Institute, whose clients include the Old Lady, said today “In view of these figures and the intensifying banking crisis we take the view that the Bank of England should cut the interest rate by half a percentage point. ”
Personally, given the parlous state of the real economy, I think the bank should grasp the bull by the horns and make an aggressive, meaningful, one full percentage point cut. Do I think they’ll do that?, the answers no. If you put a gun to my head, my best quesstimate is that they’ll plump for a half percentage point cut. If they do 25bps, or heaven help us leave rates unchanged, they’ll be a laughing stock.
