Today's mammoth cut of 1½% in the interest rate is enormously welcome in businesses both small and large across the land. It is an important weapon in the fight to stave off the impacts of the recession and to bring inflation under control. However, this
will only be the case if the banks pass the cut on to borrowers.
There must be a temptation by the banks to retain as much as possible of the cut to increase their margin and their profits. In a year which has seen banking profits plunge almost as fast as their share price, it will be understandable if the banks take
this opportunity to claw back some of their losses. But Banks must not succumb to this temptation and look at the bigger picture.
The rate cut will only be beneficial to the country and ultimately the banks if it is passed onto the hard pressed consumer and businesses under pressure to maintain employees. If businesses continue to reduce costs by redundancies, the spiral of economic
downturn and increased dole queues will lead to increased taxes and eventually lower profits. The whole thing is dependent on balance and greedy bankers must for once show how socially responsible they can be and join the nation in the tough economic battle
that needs to be won for the benefit of all.
© Finextra Research 2014