"We could be on the verge of a recession", warns economist Chris Williamson

'We are on the verge of a recession unless something's done soon', says economist Chris Williamson

The Bank of England has lowered the interest rate to 0.25 per cent

Thursday, August 4, 2016

Economist Chris Williamson has told talkRADIO that the country "could be on the verge of a recession" after the Bank of England announced a cut to the interest rate today (Thursday).

In the first reduction since 2009, the rate has been cut from 0.5% to 0.25% in an attempt to stabilise the British economy post-Brexit. 

As a result, economy growth is now expected to be just 0.8% next year, as opposed to the 2.3% forecast in May.

Williamson, chief economist of information, analytics and solutions specialists Markit, spoke to Julia Hartley-Brewer before the announcement.

"If your mortgage rates come down, you in theory have a little bit more money to spend on other things – that gives the economy a boost," he said.

"You end up in a situation when savers, such as pensioners, who aren't getting interest on their savings start cutting back on their spending. 

"So there is a limit as to how low you can go.

"This is really where central banks and what we call monetary policy does come up to its limits, because all that a central bank can really do is improve the supply of credit."

He added that the rate reduction could signal a more general downturn in the economy. 

"We are on the verge of a recession unless something’s done soon," he said. 

"It's looking increasingly like it needs to come through the government from what we call fiscal measures – cutting taxes or boosting government spending on initiatives to give the economy a boost."

Listen to the full interview to find out more about how the rate reduction might affect the economy – and your pocket.