In an attempt to solve the long term recession forecast, the Bank of England has cut official interest rates by half a percent to 1.5 percent...the lowest level in its 315-year history. So what will come of this?

Its hard to ignore the effects of the global credit crisis at the moment, house prices are falling, consumer spending has decreased and major retaillers have collapsed under the pressure. It seems that no-one is immune from this, as we saw the demise of Woolworths recently after nearly 100 of trading. The future might appear bleak but as with the previous recession of the early 1990s, we might see a light at the end of the tunnel. 

There is no doubt that the bank of England is under pressure as this latest cut moved them closer to the limits of monetary policy with a 0% interest rate. Now there is increasing pressure to avoid deflation and solve the effects of a weakening sterling whilst at the same time do everything it can to slow the impact of the recession. A big effect of this has been concentrated on house prices in the UK. Property no longer is the stable market that it was as the Housing makret has suffered its worst year on record falling by up to 16%. A similar pattern has been seen in the Service Sector, which makes up 75% of the UKs economy, where the fall was at a record pace in 2008 according to a survey by the Bank of England (BOE). 

On a more uplifting not, the BOE have given a warning about lending to houses and business is set to fall at the beginning of this year and consequently leading to more businesses going under and another fall in house prices. Whilst we are trying to protect our ecnonmy and increase people's confidence in the economy and securing jobs, can we really see when this will stabalise?

Yet we must look to the positive effects of the interest rate cuts and how this can jump start the depressed economy. With the co-operation of banks and other lenders to pass on the cuts we could see a positive effect. This will take a bit of time but the effects can be just what we need. The more support that is on offer from Banks and the Government alike, we must see any proposed changes as a step in the right direction. At least the Government and Bank of England are actually being proactive and creating solutions...however debatable they are!

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