The question we should now be asking is, "Are interest rate cuts having any real effect anymore?" Personally I don't believe that these interest rate cuts are making any difference. Interest rates have already fallen massively and it always takes a long time for these cuts to filter through to the wider economy. The sensible thing for the Bank of England to do now is to wait and see what impact their previous interest rate cuts have had before reducing rates again.
It is thought that interest rate cuts by the Bank of England will stop at 1% and the Government will have look at other ways to stimulate the economy like using quantitative easing or printing money. This is where the Bank of England would start buying Government Bonds or Corporate Bonds with government money. This additional money would then feed through to the wider economy. Quantitative easing is fraught with problems such as it can cause inflation to run wild and governments do not know when to stop or how much is enough.
The Building Societies Association has said, "No more interest rate cuts". The reason for this is the public are not depositing money into their savings accounts anymore. The Building Societies need money from savers so they can lend it out to mortgage borrowers in order to keep money moving around. Currently there are no incentive for savers to save with saving interest rate offered being below 1%.
We have reached a level today where any further interest rate cuts will be counter productive as they stop Banks from lending and savers from saving. This situation is costing the Banks more and more to lend and they are becoming less profitable in the current situation.