The Bank of England's longawaited cut in interest rates got a stern reaction in the Midlands yesterday, with the monetary policy committee being accused of "tinkering" and "having its head in the clouds".
But there were hopes that the quarter-point cut lowering the Bank's official rate to 4.5 per cent could reassure nervous potential homebuyers and others that they need no longer worry about the possibility of the cost of borrowing rising.
Halifax and HSBC led mortgage lenders in lowering their standard variable mortgage rates. Stephen Karle at West Bromwich building society said a quarter-point cut will save a homebuyer with a #100,000 mortgage #16 a month.
***
Is a quarter per cent rate cut enough? Click here to share your opinion
***
Many banks had already lowered their savings rates ahead of yesterday's decision.
A carefully balanced statement from the Bank indicated that the vote by its monetary policy committee may have been close. It noted subdued growth in the British economy in the first half of this year and the slowdown in in household spending and the growth of business investment.
The official measure of inflation in June was two per cent, exactly in line with Chancellor Gordon Brown's target. Higher oil prices may push it higher in the near future, the Bank acknowledged.
In Birmingham, David Waller, Midland chairman of PricewaterhouseCoopers said "One thing is for certain, the situation could have become very difficult without this reduction. The monetary policy committee acted very late in the day."
The Bank's most severe critic was Peter Mathews, president of the Midlands World Trade Forum. " Tinkering with interest rates in this way does nothing to help business," he said.
"If the MPC is at all interested in breathing life into retail and manufacturing, it must take the bull by the horns and support them by hacking interest rates right back. That way, UK firms can be on a level playing field with their competitors in Europe and the Far East."
Charlotte Ritchie, policy executive at Birmingham Chamber of Commerce, was little kinder.
"The MPC really has to get its head out of the clouds and take on board the reality of trying to build businesses in the present economic climate."
David Stephens, president of the Solihull chamber, agreed. "There was a case for a bigger cut in rates this time around," he insisted. "The MPC should have taken that route." Ronnie Bowker of Birmingham Forward and senior partner at Ernst & Young said "The cut is particularly important to the Midlands economy as it has been disproportionately hit by job losses at MG Rover, Marconi and, now, Time Computers. While news that Nanjing Automobile proposes to restart car production at Longbridge is welcome, that will not be enough to to fill the jobs gap left by the demise of MG Rover."
CBI director general Sir Digby Jones welcomed the cut unreservedly as a catalyst for growth and an essential boost to consumer and business confidence. But he added "The Bank will want to keep a watchful eye on the economy to gauge the impact of this reduction as a further cut might be necessary later."
Harvey Williams, speaking for the Royal Institute of Chartered Surveyors in the West Midlands hoped that the cut would be enough to reignite confidence in the region.
"We can only hope it isn't too little too late for many businesses already under pressure in the West Midlands, particularly in the manufacturing sector. The housing market is under such stress that some mortgage lenders felt it necessary to jump the gun and take action by reducing rates before the decision."
