Employers and unions call for rates cut

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The Independent Online

Business leaders and trade unions mounted a last-ditch campaign yesterday to persuade the Bank of England to cut interest rates on Thursday.

The Monetary Policy Committee is widely expected to leave rates on hold as fresh data on the housing market sounded an echo from the 1980s boom.

The Trades Union Congress warned up to 150,000 jobs would be lost this year unless the Bank took action.

The call was backed by employers' groups, including the CBI, the British Chambers of Commerce, the Institute of Directors and the Engineering Employers' Federation.

John Monks, the TUC general secretary, said manufacturing was already in recession. "The Bank cannot afford to ignore the chorus of calls for a cut in rates," he said.

The BCC's chief economist, Ian Fletcher, supported a rate cut but said it was would do nothing to help manufacturing. "Our motivation is to ensure the slowdown does not spread into services," he said.

The CBI's chief economic adviser, Sudhir Junankar, said: "We are arguing for a quarter-point cut because of the impact of the global slowdown on the overall economy."

Ruth Lea, head of policy at the IoD, added: "There is scope for the Bank to cut rates, so why not this week? But it is very difficult because the housing market is hot but manufacturing is dire."

Economists in the City said weak manufacturing was only half of a two-speed economy that made it hard for the Bank to move rates. Figures yesterday showed a strong rise in mortgage lending and consumer credit in June.

Business groups argue the Bank can afford to risk a temporary overshoot of the inflation target.