CBI welcomes MPC rate decision

The Bank of England's pre-emptive rate cut has been welcomed by the Confederation of British Industry (CBI).

The Bank's monetary policy committee (MPC) made the decision yesterday (8 October) as part of a co-ordinated rate reduction of 0.5% with five other major reserves.

While it is likely that the rate cut will lead to further inflation, its intention is to give the economy a shot in the arm and encourage investment.

John Cridland, deputy director-general of the CBI, said that the rate cut was essential and timely, and he hoped that it would help restore business and consumer confidence.

He added: "We have now seen major steps by both the government and the Bank of England to support the economy and the financial system."

While some lenders, such as Lloyds TSB and Woolwich, have already reduced their mortgage lending rates, it is hoped that others will follow suit and cut interest rates on business loans.

It was revealed over the weekend that overdraft rates had risen as high as 15.8% since the onset of the credit crunch.