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Rate cuts ‘losing’ effectiveness

Business leaders are sceptical about any positive effects from the Bank of England’s cut in base rate to an all-time low of 0.5% in its 315-year history.

Ian McCafferty, CBI chief economist, said continuing cuts were becoming less and less effective as a means of stimulating the economy.

Interest rates have been reduced six times since October.

The Bank also said it would expand the amount of money in the system by £75 billion to try to boost bank lending. The extra money will be electronic, not printed notes.

Chancellor Alistair Darling said that increasing the supply of money was “absolutely essential” in order for the UK to recover from the recession. It should get the economy moving to “help people and to help businesses grow”.

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