Experts doubt rate cut retail leap

05/12/2008 12:17

The Bank of England's dramatic interest rate cut to 2% will have "very little short-term effect" on consumer spending, retail analysts have said.

Experts thought it was unlikely to induce shoppers to splash out before Christmas.

Neil Saunders, consulting director at consumer forecaster Verdict Research, compared the 1% cut from the Bank's base rate to "facing a tsunami and holding up an umbrella."

He said: "If the Bank had wanted to ease some of the pressure on the high street they would have had to act six to eight months ago."

He described interest rates as a "very blunt instrument" for controlling the economy.

Rising unemployment is also expected to minimise any boost to consumer spending.

Nick Bubb, retailing analyst at Pali International, said: "It's all shades of gloom at the moment. Job cuts are escalating in an astonishing way and affecting the whole country, while the value of people's houses is still falling. People may be more likely to save rather than spend any extra money gained from the rate cuts."

© Press Association 2008