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Economy needs big spenders, says Capital Economics

The current economic situation needs consumers to stop hoarding their cash and instead get them spending on their credit cards, it has been suggested.

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22 December 2008

Economy needs big spenders, says Capital Economics

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Jonathan Loynes, chief European economist at Capital Economics, explains the UK's monetary policy decision makers need to make saving less attractive and spending ever more appealing.

He adds this is a necessary element of policy and not just an unintended by-product and it is part of the reason the Bank of England's monetary policy committee has been cutting the base rate of interest aggressively recently.

Mr Loynes states: "What policy makers are trying to do is say to you: "It's not really worth your while saving so much money - why don't you spend it?"

Increased spending on the part of consumers, the economist suggests, will hopefully have a beneficial impact on the entire economy.

The Bank is due to take its next decision on the base rate of interest on January 8th 2009.

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