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Scottish Chambers of Commerce are calling for a further reduction in Bank of England base rates tomorrow (5 February 2009) as a necessary measure to counteract the threat of deflation. Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said:

“With the Bank of England base rate at a historically low level, its usefulness as an economic tool to provide a stimulus is diminishing. Nevertheless it is necessary to take timely action to reduce the potential threat of deflation and in this respect we are calling on the Monetary Policy Committee to cut interest rates by at least a further 0.5% this month. Inflation has fallen from a peak of 5.5% to 3.1% in just three months, whilst the RPI rate of inflation, which includes mortgage interest payments, fell to only 0.9% last month.

“Clearly the single factor which is having the most profound effect on the operation of businesses in Scotland at the moment is the restriction in the availability of credit. Reducing the base rate will not necessarily have a direct effect on this, so it is vital that addressing the restoring the flow of credit continues to be the top priority for the government.”