B of E makes further rate cut

Posted on 4 Dec 2008 by The Manufacturer

The Bank of England has today slashed a further full per cent off the base interest rate, bringing it down to two per cent and its lowest level since 1951.

The Bank of England’s monetary policy committee released statement which said: “In the United Kingdom, business surveys have weakened further and suggest that the downturn has gathered pace. Consumer spending and business investment have stalled, while residential investment has continued to fall.

“In the November Inflation Report, the committee’s projection for inflation showed a substantial risk of undershooting the 2% CPI inflation target in the medium term. The subsequent decline in market interest rates and the further depreciation in sterling have raised the profile for inflation since then. But the weaker outlook for activity in the near term and the further falls in commodity prices have lowered that profile. Although the temporary reduction in Value Added Tax will lead to some volatility in inflation over the next two years, the new fiscal plans are unlikely to have a significant effect on inflation beyond that horizon… Accordingly, the committee determined that a further reduction in Bank Rate of 1.0 percentage points to 2.0% was necessary in order to meet the target in the medium term.”

A third straight round of cuts has seen the base rate fall from 5 per cent in September to 2 per cent today. Last month’s per cent-and-a-half fall was the biggest in history.