The Confederation of British Industry, the nation's top business lobby, said the central bank should slash its benchmark interest rate in November by the most in seven years to halt a recession.
``Our members are having a tough time,'' Richard Lambert, director of the CBI, told reporters in London. ``There's scope for a half-point cut in November,'' assuming the inflation outlook doesn't change. ``We are now almost certainly in a mild recessionary phase.''
The Bank of England has kept its main rate at 5 percent since April on concern that the fastest inflation in at least a decade will become embedded in the economy. The European Commission says the U.K. has already entered its first recession since 1991 after growth ground to a halt in the second quarter, ending the longest stretch of uninterrupted expansion in a century.
Lehman Brothers Holdings Inc. plans to file for bankruptcy protection and Merrill Lynch & Co. agreed to sell itself this weekend, adding to the risk of further deterioration in Britain's financial services industry after the yearlong credit squeeze. The Bank of England pledged today to ``take appropriate actions if necessary'' to stabilize money markets.
The central bank, which hasn't cut its key rate by more than a quarter point since the aftermath of the September 2001 terrorist attacks, should reduce its benchmark to 4.5 percent this year and to 4 percent in early 2009, the CBI said.