Modest cut in bank rate to 5.25 per cent
07 02 2008 United Kingdom
The Bank of England’s Monetary Policy Committee (MPC) has reduced the official Bank Rate by a quarter percentage point to 5.25 per cent.
This was despite calls for a 0.5 per cent fall in interest rate, following gloomy news for the UK and world economies and the US Federal Reserve’ cuts by 1.25 per cent in January.
While Britain’s service sector has grown faster than expected this year, confidence among purchasing managers fell to its lowest level in six years. Retail sales have been weak and manufacturing growth in the UK has slowed to a two and half year low.
The latest figures show inflation at 2.1 per cent, very close to the MPC’s 2 per cent target. However the fall in the value of sterling will increase the cost of imports. Higher prices for food and energy are also expected to lift inflation in the coming months.
The FTSE index fell 2.58 per cent on news of the MPC’s decision and sterling dropped 1.7 cents lower at $1.9439.
The previous change in Bank Rate was a reduction of 0.25 percentage points to 5.5 per cent on 6 December 2007.
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