facebook rss twitter

Bank of England shocks with massive 1.5% cut in interest rates

by Scott Bicheno on 6 November 2008, 12:36

Tags: Bank of England

Quick Link: HEXUS.net/qap3q

Add to My Vault: x

More comment

Since the beginning of the year, the Committee has set Bank Rate to balance two risks to the inflation outlook. The downside risk was that a sharp slowdown in the economy, associated with weak real income growth and the tightening in the supply of credit, pulled inflation materially below the target. The upside risk was that above-target inflation persisted for a sustained period because of elevated inflation expectations. In recent weeks, the risks to inflation have shifted decisively to the downside.

 As a consequence, the Committee has revised down its projected outlook for inflation which, at prevailing market interest rates, contains a substantial risk of undershooting the inflation target. At its November meeting, the Committee therefore judged that a significant reduction in Bank Rate was necessary now in order to meet the 2% target for CPI inflation in the medium term, and accordingly lowered Bank Rate by 1.5 percentage points to 3.0%.

 

Here's a graph of UK interest rates since 1985 courtesy of houseweb.co.uk:



HEXUS Forums :: 17 Comments

Login with Forum Account

Don't have an account? Register today!
Blimey - didn't expect that one coming.
A cut was obviously in the offing but i wasn't expecting anything over 1%
I can't help thinking this is a bad move. Very bad. It's definitely bad for my savings.
i think its bad for the pound reducing interest rates so its worse doing this, pound will be worse against pound and so goods go up in price as well as lack of sales so its going to do more damage.
I've just bought a house at the rate in early October. To say I'm not pleased is an understatement.
Yay! The wonders of a baserate tracker mortgage! I am cetainly happy about this. It means more money in the pot for the renovations on my house.