Leading retailers and business groups last night urged the Bank of England's Monetary Policy Committee to consider an aggressive programme of interest rate cuts.
The British Retail Consortium (BRC) and the British Chambers of Commerce (BCC), said that if, as is expected, the MPC cuts interest rates today by just 0.25 percentage points to 5.25 per cent, further reductions will be needed to prevent a serious economic slowdown. David Kern, the economic adviser to the BCC, said: "We would welcome a cut to 5 per cent. The longer the MPC waits, the bigger the danger."
Stephen Robertson, the director general of the BRC, added: "This must be only the next in a series of momentum-building reductions to avoid the slowdown becoming any longer or deeper."
The CBI was more restrained in its calls. Its chief economic adviser, Ian McCafferty, said: "A modest cut now would help ensure a soft economic landing, without undermining the Bank's credibility on inflation."
The Governor of the Bank, Mervyn King, has desc-ribed the MPC's task as a "delicate balancing act". Data released yesterday confirmed how tricky it will be to stay on top of inflation while still providing enough of a boost to the economy.
The BRC said shop prices were 1.2 per cent higher in January than a year ago, up from an ann-ual 1 per cent rate in December. Food prices were 3.9 per cent higher than a year ago, it warned, up from the previous month's 3.8 per cent.
However, these inflationary pressures are being registered at the same time as data showing a slowdown in growth. Demand for permanent and temporary staff fell to a two-year low last month, according to the Recruitment and Employment Confederation (REC), confirming a softening in the labour market. The survey of 400 recruitment and employment consultancies showed only a "subdued" rise in placements. The Bank last cut rates in December, by a quarter of a percentage point; last month the MPC left rates on hold.
This month's decision has been widely discounted: the debate now centres on how fast the Bank will cut rates.
One factor is households' expectations. Lloyds TSB's latest Consumer Barometer suggests an increasing number of consumers bel-ieve interest rates will be higher in a year because of rising inflation, diluting the impact of rate cuts now.Reuse content