Short Term Threats February 20th, 2008
Kate Barker, a member of the Bank of England’s Monetary Policy Committee, warned that the greatest pressures on the economy stemmed from falling housing prices and a reduction in mortgage approvals. Adding that the Bank could not stop the impact of these pressures in the short term.
There is a concern that the credit crunch goes deeper than the BoE predicts, leading to the realisation of these concerns but would send some households into negative equity. If this were to happen, people’s willingness to spend would diminish leading to a slowdown across the economy.
The Bank must surely now act quickly and cutt interest rates again in March to head off such outcomes as best as possible.
