31/07/2001

Consumer credit could grow further if interest rate is cut

A rise in consumer credit that has outstripped City forecasts, and could herald a further cut in interest rates to buoy up the economy.

According to the latest figures, released on Monday 30 July, UK consumer credit has grown by £1.3 billion, with 106,000 new mortgages receiving approval, effectively a rise of 3,000 from first quarter figures of 2001.

The Credit Card Research Group have also released figures that show a 5 per cent increase in card usage during the month of June to £16.5 billion - a rise of 19 per cent on the same month during 2000.

Interest rates have held steady at 5.25 per cent during the past two months despite increasing fears of recession. However, it is thought that when the Bank of England's Monetary Policy Committee (MPC) meets on Wednesday, the outcome of discussions will see the MPC apply caution due to the risk that a cut in interest rates could spark a spree of high street spending and pose inflationary risks. (CL)

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