Interest rate cut to 2 per cent - the lowest level in 57 years
04 12 2008 United Kingdom
In the latest of a series of dramatic cuts, the Bank of England’s Monetary Policy Committee (MPC) reduced the Bank Rate by a further 1 per cent. The official interest rate has fallen by 3 percentage points in the last three months.
At its latest monthly meeting, the MPC noted that consumer spending and business investment have now stalled, while residential investment and property property values have continued to tumble.
In November there was a 36.8 per cent drop in new car sales in the UK, the steepest decline in nearly thirty years according to the Society of Motor Manufacturers and Traders.
Continuing falls in inflation are expected in coming months, reinforced in part by the temporary reduction in Value Added Tax introduced by Chancellor Darling in his Pre-Budget Report last month.
The MPC took the view that, in spite of the continuing slump in the rest of the world, further falls in the value of sterling should moderate the impact of weaker global growth on the United Kingdom.
Conditions in money and credit markets remain extremely difficult and it was unlikely that a normal volume of lending in the UK would be restored without further measures, according to members of the MPC.
Earlier today, Sweden's central bank slashed interest rates from 3.75 to 2.0 per cent. Later in the day the European Central Bank cut its official interest rate to 2.5 per cent.
The previous change in Bank Rate was a reduction of 1.5 percentage points to 3.0 per cent on 6 November 2008.
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