Bank of England cuts interest rate by half point to 4.5 per cent
08 10 2008 United Kingdom
In a surprise announcement earlier today, the Bank of England’s Monetary Policy Committee cut the bank rate as part of the joint action by central banks to stabilise the global economy
The Monetary Policy Committee (MPC) cut the bank rate by a full half point from 5 per cent to 4.5 per cent, in response to further slumps in stock markets and UK manufacturing and service sectors.
The UK inflation rate rose to 4.7 per cent in August, reflecting increases in food and energy prices. The MPC had earlier signalled that a further jump to above 5 per cent was expected over the next month or two, mainly due to increases in the price of domestic energy.
But inflation was forecast to drop back following the recent drop in oil prices and expected further falls in industrial output.
The MPC indicated that the current reduction in bank rate was a ‘one off’ move, necessary to meet the 2 per cent target for inflation in the medium term.
This announcement coincided with a £500 billion rescue package for the UK banking system unveiled by the Prime Minister and Chancellor today. It was part of coordinated action by five other central banks which also cut their rates.
Official interest rates now stand at 3.75 per cent in Europe and 1.5 per cent in the USA.
The previous change in Bank Rate was a reduction of 0.25 percentage points to 5.0 per cent on 10 April 2008.
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