LONDON (Reuters) - The country’s economy shrank 0.5 percent in the three months to October, and lower interest rates are unlikely to help boost growth, a leading think-tank said on Thursday.
In its monthly survey, the National Institute of Economic and Social Research also said that economic output in October alone fell on the year, the first time that had happened since the recession of the early 1990s.
Bank of England policymakers could cut interest rates by their biggest amount in 15 years on Thursday to prevent the economy from sliding into a deep and prolonged recession.
Most analysts reckon a 50 basis point cut from 4.5 percent is on the cards, following on from last month’s half-percentage point cut, and markets are pricing in a 75 basis point reduction.
“The reduced availability of bank credit means that interest rate reductions are unlikely to be as effective as they have been in the past and an early resumption of economic growth cannot be expected,” NIESR said.
Prime Minister Gordon Brown has urged banks to pass on lower official rates to their customers after mortgage lender Abbey, owned by Spain’s Banco Santander (SAN.MC), raised rates on some of its home loans this week.
Reporting by Fiona Shaikh; Editing by Ruth Pitchford