Slowdown boosts rate cut hopes
Economy: Pressure mounts for further reduction in borrowing costs as housing slump claims another corporate victim
Friday 20 October 1995
There was a modest boost to hopes of a cut in base rates yesterday from figures showing a slowdown in broad money growth and a business survey reporting weaker orders.
The annual rate of growth in M4 fell last month for the first time this year. In the latest published monetary minutes, both Kenneth Clarke, Chancellor of the Exchequer, and Eddie George, Governor of the Bank of England, had noted that rapid monetary growth was a potential cause for concern.
Economic slowdown was the message of a British Chambers of Commerce survey. The level of domestic orders in July-September was the lowest in two years, with manufacturing weaker than services for the first time in two years. ''The engine of recovery is running out of steam,'' according to the survey.
However, Robin Geldard, president of the BCC, said a shortage of capacity meant the Chancellor should not stimulate the economy. To do so would bring the risk of inflation.
Bank of England figures showed that broad money grew at 8.2 per cent in the 12 months to September, a rate still near the top of the government's 3-9 per cent monitoring range. The annualised three-month growth of M4 - taken as the best indicator of short-term trends - also fell but remained at 9.5 per cent.
Although mortgage lending by banks and building societies remained depressed, there was a big jump in other lending by the big British banks. It rose to pounds 2.3bn in September from pounds 942m the previous month.
One reason for the size of the rise in lending was a jump in loans to leasing companies, which soared to pounds 657m.
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