Bank of England reduces bank rate to 5.5 per cent

06 12 2007 United Kingdom

The Bank of England’s Monetary Policy Committee today voted to reduce the official bank rate by 0.25 percentage points to 5.5 per cent.

Although output in the United Kingdom has expanded at a brisk pace for the past two years, the Monetary Policy Committee (MPC) recognised signs that growth has begun to slow.

Inflation was 2.1% in October but levels of spending by consumers and businesses are expected to moderate. Conditions in financial markets have deteriorated and the supply of credit to households and businesses is tightening, posing risks to the outlook for both industrial output and inflation.

House prices fell in November at the sharpest rate since 1995.

Against that background, the MPC decided that a decrease in bank rate of 0.25 percentage points to 5.5 per cent was needed to meet the 2 per cent target for inflation in the medium term.

Up until only three days ago, economists were predicting that the MPC would leave rates on hold until the New Year.

Manufacturing activity has been unexpectedly resilient, with a 0.3 per cent growth in output in the month to September, but service sector activity has fallen. Last month’s growth in services slowed to its weakest rate in four years.

The pound tumbled heavily yesterday. Sterling fell below $2.03 and was worth 72.29p against the euro, the biggest one-day drop since April 2004.

The last change in bank rate was an increase of 0.25 percentage points to 5.75% on 5 July 2007.

Back to top of page

© 2007 Copyright topenterprise uk ltd All rights reserved
Property of topenterprise uk ltd and made available under the terms of use notice on this web site