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| Version 3 | Version 4 |
|---|---|
| Economy blues boost rate-cut call | Economy blues boost rate-cut call |
| (about 3 hours later) | |
| The Bank of England is coming under increased pressure to cut interest rates as more evidence emerges that economic conditions may be worsening. | The Bank of England is coming under increased pressure to cut interest rates as more evidence emerges that economic conditions may be worsening. |
| The Bank is due to start a two-day rate setting meeting and will announce its decision at midday on Thursday. | The Bank is due to start a two-day rate setting meeting and will announce its decision at midday on Thursday. |
| Many observers are now calling for the Bank to cut rates to 5.5% from 5.75% to help shore up demand in the housing and retail markets. | Many observers are now calling for the Bank to cut rates to 5.5% from 5.75% to help shore up demand in the housing and retail markets. |
| Surveys have shown falling house prices and a slump in consumer confidence. | Surveys have shown falling house prices and a slump in consumer confidence. |
| Consumer demand is one of the main drivers of the UK's economic growth, while rising house prices have been the main factor underpinning a "feel-good factor" that has allowed shoppers to keep spending. | Consumer demand is one of the main drivers of the UK's economic growth, while rising house prices have been the main factor underpinning a "feel-good factor" that has allowed shoppers to keep spending. |
| Uncertainty about the effects of the credit crunch together with rising oil and food prices seem to be affecting feelings about jobs and the future economic situation Fionnuala Earley, Nationwide chief economist | Uncertainty about the effects of the credit crunch together with rising oil and food prices seem to be affecting feelings about jobs and the future economic situation Fionnuala Earley, Nationwide chief economist |
| However, the economic environment that allowed many consumers to borrow money cheaply, remortgage quickly and run up large debts now seems to have changed, with much stricter rules being applied. | However, the economic environment that allowed many consumers to borrow money cheaply, remortgage quickly and run up large debts now seems to have changed, with much stricter rules being applied. |
| Financial industry experts are now warning that tougher times lie ahead because of the continuing impact of problems in the US housing market, which triggered a global credit crunch and are rippling out across the globe. | Financial industry experts are now warning that tougher times lie ahead because of the continuing impact of problems in the US housing market, which triggered a global credit crunch and are rippling out across the globe. |
| "The UK economy had considerable momentum in the third quarter, but events move on, and now the Bank of England is wondering whether we are at a tipping point," said Graeme Leach of the Institute of Directors. | "The UK economy had considerable momentum in the third quarter, but events move on, and now the Bank of England is wondering whether we are at a tipping point," said Graeme Leach of the Institute of Directors. |
| Future gazing | Future gazing |
| Already the effects are becoming more evident in the UK, with an increase in the number of mortgage arrears and problems at lenders, not least Northern Rock, which may be taken over. | Already the effects are becoming more evident in the UK, with an increase in the number of mortgage arrears and problems at lenders, not least Northern Rock, which may be taken over. |
| HAVE YOUR SAY The current "credit crunch" will bring to an end the era of irresponsible lending and irresponsible borrowing fuelled by fantasy house valuations Nigel Moore, UK Send us your comments On Wednesday, Halifax reported that UK house prices dropped 1.1% in November as higher interest rates and increased mortgage repayment costs took their toll. | HAVE YOUR SAY The current "credit crunch" will bring to an end the era of irresponsible lending and irresponsible borrowing fuelled by fantasy house valuations Nigel Moore, UK Send us your comments On Wednesday, Halifax reported that UK house prices dropped 1.1% in November as higher interest rates and increased mortgage repayment costs took their toll. |
| According to the lender, last month's decline took the annual rate of growth to 6.3%, compared with 8.9% in October. It now calculates that the average residential property across the UK now costs £194,895. | According to the lender, last month's decline took the annual rate of growth to 6.3%, compared with 8.9% in October. It now calculates that the average residential property across the UK now costs £194,895. |
| At the same time, a report from rival lender Nationwide showed that its measure of consumer confidence had seen the biggest monthly decline since the survey began in 2004, sliding by 12 points to 86 last month. | At the same time, a report from rival lender Nationwide showed that its measure of consumer confidence had seen the biggest monthly decline since the survey began in 2004, sliding by 12 points to 86 last month. |
| A separate gauge of service sector growth released on Wednesday slowed to its weakest in more than four years. | A separate gauge of service sector growth released on Wednesday slowed to its weakest in more than four years. |
| In the past week, a number of companies, including menswear retailer and rental company Moss Bros, have said that they are seeing a slowdown in demand on the High Street. | In the past week, a number of companies, including menswear retailer and rental company Moss Bros, have said that they are seeing a slowdown in demand on the High Street. |
| "Uncertainty about the effects of the credit crunch together with rising oil and food prices seem to be affecting feelings about jobs and the future economic situation," said Fionnuala Earley, Nationwide's chief economist. | "Uncertainty about the effects of the credit crunch together with rising oil and food prices seem to be affecting feelings about jobs and the future economic situation," said Fionnuala Earley, Nationwide's chief economist. |
| Time to move | Time to move |
| While many analysts are now trying to work out if the negative economic data and reports point to a more severe slowdown in the UK economy next year than was earlier predicted, others have already made up their minds. | While many analysts are now trying to work out if the negative economic data and reports point to a more severe slowdown in the UK economy next year than was earlier predicted, others have already made up their minds. |
| The Daily Telegraph said that former members of the Bank's rate setting Monetary Policy Committee, Willem Buiter and Sushil Wadhwani, were among those calling for borrowing costs to fall from their current level of 5.75%. | The Daily Telegraph said that former members of the Bank's rate setting Monetary Policy Committee, Willem Buiter and Sushil Wadhwani, were among those calling for borrowing costs to fall from their current level of 5.75%. |
| If it cuts, it risks rising inflation. If it holds, it risks snuffing out economic growth Adam Lent, TUC | If it cuts, it risks rising inflation. If it holds, it risks snuffing out economic growth Adam Lent, TUC |
| Business people and trade unions have also been calling for action, warning that consumers were becoming more cautious about how and what they were spending. | Business people and trade unions have also been calling for action, warning that consumers were becoming more cautious about how and what they were spending. |
| On Tuesday, Tesco's finance director Andrew Higginson called on the Bank to "move decisively to take interest rates down". | On Tuesday, Tesco's finance director Andrew Higginson called on the Bank to "move decisively to take interest rates down". |
| And it is not just in the UK that problems are emerging. The strength of the pound against the dollar may also make it harder for firms to compete against foreign rivals and export goods. | And it is not just in the UK that problems are emerging. The strength of the pound against the dollar may also make it harder for firms to compete against foreign rivals and export goods. |
| "We recognise the MPC's dilemma," said Adam Lent, head of economic and social affairs at the TUC trade union body. | |
| "If it cuts, it risks rising inflation. If it holds, it risks snuffing out economic growth." | |
| Mr Lent added that "economic growth, already predicted to fall in 2008, will decline even further than previously expected. | |
| "In our view, this is the greater threat and a cut is needed to boost economic growth." |