Government won't tell Bank to cut rates
The government will not put pressure on the Bank of England to cut interest rates but is prepared to take big steps with economic policy to stem the credit crisis, Chancellor Alistair Darling said on Sunday.
RBS profits up 9 percentDarling said he needed to be flexible with the public finances and would outline on Wednesday how governments ought to react to the "global shock."
Speculation has grown in recent months that the government will change its fiscal rules, which put limits on public debt, to give it more room to act to help families and businesses cope as Britain edges near its first recession since the early 1990s.
"I'm not going to be writing to the Bank of England to change its remit," Darling told BBC television, responding to a demand from an opposition politician that the government should tell the independent central bank to slash borrowing costs.
The Bank, given the power to set interest rates shortly after the Labour Party was elected to government in 1997, is required to target inflation at 2 percent and, subject to that, support the government's wider economic policies.
Most analysts expect the Bank's Monetary Policy Committee to cut interest rates to 4.75 percent from 5 percent at its monthly meeting on Thursday, despite inflation running at more than twice the official target, because of fears over the economy.
Some say borrowing costs will eventually need to fall below 3.5 percent to their lowest level in more than 50 years to prevent a deep and prolonged recession.
"We're on the cusp of a major economic disaster coming out of the financial disaster," Liberal Democrat economic spokesman Vincent Cable said.
"A big cut (in interest rates) is going to have to happen and the Chancellor of the Exchequer (Darling) is going to have to clear the way in order for them to do it."
From Iceland to Italy, officials scrambled at the weekend to contain the fallout from the deepest financial crisis since the 1930s amid a continued debate about whether a fragmented European response could keep pace with a fear-driven market.
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