Sir Alan Budd

Former chief economic adviser to the Treasury and founding member of the Monetary Policy Committee

Cut 100 basis points

I vote for a 100 basis point cut. The domestic and international indicators are pointing clearly to a period of weak demand and output, and the inflationary indicators are becoming more favourable. It now seems most likely that the rise in inflation will prove to be temporary and that we shall then see inflation falling below its target.

A cut of 100 basis points should not be seen as a panic action. It is exceptional but conditions are exceptional. It is a measured response to the rapid deterioration in the data. The balance of risks between inflation and recession has now shifted significantly towards recession. The forecasts will justify a cut of this order while leaving room for further cuts as appropriate.

Bronwyn Curtis

Chair of the Society of Business Economists

Cut 100 basis points

Bold steps are needed to halt the downward spiral in confidence caused by the negative feedback loop between the banking sector and the real economy.

A 1 per cent cut is much larger than normal but these are not normal conditions and further cuts in the Bank rate as well as fiscal policy stimulus will be needed.

At the very least this will ease the debt servicing burden since 60% of corporate lending is based on Libor and about half the mortgages are locked into movements in the Bank rate.

The risks to medium-term inflation have shifted decisively to the downside and the latest credit conditions survey shows that banks are continuing to tighten the amount of credit available to households and corporates.

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