Sir Alan Budd

Former chief economic adviser to the Treasury and founding member of the Bank’s MPC

CUT BY A QUARTER-POINT

I vote for a 25bp cut. There are now signs that demand and output are slowing down in the UK and there is stronger evidence of a slowdown in the rest of the world, particularly in the US. It is sensible to make another cut at this stage to help encourage demand. It may be that additional cuts will be needed later in the year but there is no urgency and the MPC does have to take account of the evidence that inflationary expectations have moved up.

Claudio Costamagna

Former vice-chairman of Goldman Sachs investment banking in Europe

HOLD

My vote for this week decision is to hold rates where they are, there is no need to give clear direction and the debate between inflation and growth is still wide open.

GEOFFREY DICKS

Chief UK economist, RBS Global Banking and Markets

CUT BY A QUARTER-POINT

The MPC's response to the credit crunch so far is inadequate — one 25bp cut is not enough to offset the rise in market rates and reduction in credit availability that we have had in the last six months. The MPC needs to look through the pick-up in inflation that is coming from another round of energy price hikes and recognise that the risks to economic activity are very much to the downside and that in two years' time an undershoot of the CPI target is far more likely than an overshoot. The debate should be between cutting 25bp and 50bp, not on whether to cut at all.

Martin Weale

Director, National Institute of Economic and Social Research

CUT BY A QUARTER-POINT

I am voting for a quarter point reduction this week. With inflation likely to rise in the near term and growth for the last quarter still on trend there is a case for waiting for the economy to slow a bit more before making a cut. But overall I think the Bank can take the risk. The Bank needs to be measured. Since low interest rates caused the debt problems which we are now living with, to expect low interest rates to solve the problem by encouraging people to take on more debt is obviously mistaken. The reality is that we will have, and probably need a period of slow economic growth.

Bronwyn Curtis

Chair, Society of Business Economists

CUT BY A QUARTER-POINT

Liquidity in the wholesale credit markets has improved but the effect of the credit crunch is far from over. Banks are still tightening their lending criteria and the rates being charged to the private sector are hardly changed from mid 2007. The interest sensitive sectors like housing and corporate investment are already showing signs of stress. The housing market has greater falls ahead and the deteriorating investment climate adds to the downside risks to growth.

Elsewhere the negative mood in the financial markets shows no sign of easing. We've also had a gloomy global outlook from the IMF and deep interest rate cuts from the Fed which smack of panic that the US economy will dip into recession.

Even though there is a chance that cpi will climb above 3% in the second half of the year and expectations of future inflation have risen, slower growth will dampen inflation in 2009. Second round effects via higher wage settlements have been relatively muted. I expect that to continue.

Sir Steve Robson

Former Second Permanent Secretary to the Treasury

HOLD

Hold. Economic activity is clearly slowing in the UK but inflation is not. The prime objective should be to get inflation under control, not to reflate demand. Slowing activity alone does not look likely to be enough. All the inflationary signals point to unchanged rates. The CPI is above target and set to rise. Input price rises are at their highest since the survey began in 1999. Output price rises are at their highest for 3 years. Inflationary expectations amongst both firms and households are worryingly strong.

Rupert Pennant-Rea

Former Deputy Bank of England Governor; chairman of Henderson fund managers

CUT BY A QUARTER-POINT

The way a Central Bank conducts monetary policy is always important - and in today's uncertain world, the "how" matters almost as much as the "what". After pausing last month, the MPC can now consider the case for a further cut in rates without appearing to be acting out of panic or under pressure.

On balance, there is a reasonable case for a precautionary cut, because accumulating evidence suggests the economy is now slowing to somewhere below its underlying growth rate, so inflationary pressures should start to ease in due course. Although there is an argument for delaying by a month, my preference would be for a quarter-point cut now.

Anatole Kaletsky

Editor at Large and chief economics commentator, The Times

CUT BY A HALF-POINT

I vote for a rate cut of 50bp. Last month the MPC decided to wait for further evidence on economic and financial developments around the year-end. That evidence is now in.

The outlook for the world economy darkened dramatically since the last MPC meeting, with recent US and EU statistics suggesting that demand fell off a cliff around the New Year. The paralysis in the banking system has not been resolved.

The time has come for much more aggressive policy action, following the example of the measures announced in the US. While a move as dramatic as the Fed's 125 basis point move would be premature, the MPC should signal the seriousness of its commitment to avoid recession with half percentage point move.

Sushil Wadhwani

Former external member of the Bank of England’s Monetary Policy Committee

CUT BY A HALF-POINT

I would vote to cut the Bank rate by 50 basis points.

a) As I have been expecting for some time, the US economy has continued to weaken. Stock markets have fallen further, and remain vulnerable, with cyclically adjusted price-earnings ratios still high. Though recent monetary and fiscal stimulus will help, downside risks to growth have increased, with recession a real possibility. Risks include further financial sector shocks, including the as yet unresolved monoline insurer issue, and further weakness in the housing market, whose impact on consumption is as yet unknown. Furthermore, there are now clear signs of weakness spreading to the Eurozone, which, of course, is the UK's largest export market.

b) In the UK we have again seen weak outturns in survey data on output and consumption, and further evidence that the housing market has turned, with falling prices and lower activity.

c) Oil prices have fallen over the month, and the sterling exchange rate has been broadly stable. In any case, the pass-through of earlier cost pressures is likely to be modest in the current economic climate. Also, a failure to cut interest rates will cause the pound appreciate again.

d) Like the MPC, the Federal Reserve was initially slow to cut interest rates during 2007. Consequently, the Fed is having to catch-up and accelerate its rate cuts, correctly pointing out that it is best to attempt to pre-empt the feedback effects that can occur when an economy starts to weaken significantly. It is also very important for the MPC to be pre-emptive and to take similar action.

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