Different views from Birmingham Forward and Future members on Interest Rates

With the Bank of England due to announce its monthly decision on interest rates this Thursday following the meeting of the Monetary Policy Committee, perhaps one of the most important decisions it has taken in recent times, Birmingham Forward and Future has been polling members on the subject. Members were asked to vote via an e poll on its website on the following proposition. "The economy is experiencing one of the most turbulent times in living memory. A widely held view is that the UK is on the verge of a recession. There are serious challenges facing business not least in the property and financial services sectors. Each month the Bank of England takes a judgment on interest rates balancing its decision on supporting the economy and controlling inflation. For the past five months the bank rate has been maintained at 5.00%. Do you now believe it is time for the Bank of England to further reduce interest rates?" The results of the survey make for interesting reading.

• 77% of Birmingham Forward members, who took part in the survey, believed that the rate should be reduced this week.
• Birmingham Future members, who took part in the survey, was split in their view with 50% in favour and 50% against.*

Members were also asked to post comments. Typical of the observations from Birmingham Forward members was this quote: "We acknowledge that the MPC has inflationary concerns but the risk of recession is far greater. Prompt action is needed in order to deal with the issue otherwise the situation will get out of control and the results could be catastrophic." For Birmingham Future members, as the overall survey result demonstrated comments and views were varied. One observer said: "Longer term economic stability is important. Any reduction in the interest rate would fuel inflation which is the last thing the economy needs." Another Future member who didn't see a benefit in reducing the rate at this time said: "Not yet on our current path. The time certainly appears to be coming but I am not sure the time is right yet." Reflecting on the result of the surveys, Chairman of Birmingham Forward, Richard Edwards said; "This has been a very interesting exercise. The view of Forward members was decisive with over three quarters of respondents wanting a reduction in the rate. Future members were less clear cut and there was an exact split for and against." "In general, Forward members were more worried about a major downturn in the economy whereas Future members seemed to be more concerned over the impact of inflation. I think this reflects a very difficult and complex economic environment at the moment and shows how difficult the MPC's decision on Thursday will be." "Even if a rate cut was announced on Thursday, due to the current turbulence in banking markets, to what extent this would be passed on to borrowers in the short term is of course another matter. Forward members clearly believe however that something should be done now to improve confidence and the UK should follow the US lead and cut rates."