The Bank of England's Monetary Policy Committee (MPC) took the decision today, in concert with other central banks around the world, to cut interest rates by 0.5 percent.
But will it help? I'm not convinced...
1) It is only 0.5 percent. Sure, it's the biggest single cut by the MPC since 9/11 but people have been calling for cuts in the region of 1-2 percent
2) The famous economist John Maynard Keynes once said that cutting interest rates during a financial crisis is like trying to push against a piece of string. The old boy wouldn't think it will work.
3) Japan - 10 years of stagnation - the 'Lost Decade' - wasn't helped by 0 percent interest rates.
Nevertheless, I feel the cut should be welcomed.
For those struggling to make ends meet, cuts in their mortgage repayments (assuming the interest rate cuts fee through to us average Joes) will be very welcome.
In terms of savings, normally banks would reduce the savings interest rates they offer but this time it might be different as they need our money like never before so rates may still stay 'high'.
Finally, even if it does not help the economy begin to recover it is unlikely to hurt, so long as - and this is the big 'if' - inflation, already far too high, does not get out of control as a result of this move. The gamble being taken is that with the slowdown affecting the consumption of oil and commodities, inflation will begin to fall and in any case helping stimulate the economy by getting cheaper lending rates is being seen as the more important objective.
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