By Claire West

Responding to the 1% interest rate cut announced by the Bank of England, John Philpott, Chief Economist at the Chartered Institute of Personnel and Development (CIPD), said:

“The jobs market was calling out for this big rate cut — what’s vital now is that commercial rates fall in line to aid hard pressed employers. With bank rates at an historic low we are clearly entering uncharted economic waters. The MPC has wisely left room for further cuts but there aren’t now many throws of the monetary dice left.”

Ian McCafferty, CBI Chief Economic Adviser said:

“The economy needs a significant monetary stimulus and the Bank has clearly decided this will be best achieved by another big cut in interest rates. What is critical for business and consumers alike is that this reduction is passed on.

“The economy is stalling, inflation is expected to undershoot the Bank’s own target and the headline RPI rate of inflation is likely to turn negative for at least a few months in 2009. We need to see lending improve and to keep business working.”

FSB National Chairman John Wright said:

“As we enter the Christmas period many small businesses will be worried about how to deal with a lack of footfall and higher operating costs while also feeding their own families over the festive season.

“Lower rates will bring a vital boost to the market place and compel the banks to pass this on and lend fairly to small businesses. A cut in interest rates will provide a welcome piece of mistletoe to give a kiss of life to the economy when it needs it most.”