Proactiveinvestors recommends
Pdf

Bank of England cuts interest rate to historic low of 1.5%

8th Jan 2009, 12:28 pm Bank of England cuts interest rate to historic low of 1.5%

The Bank of England’s Monetary Policy Committee today voted to reduce the official rate paid on commercial bank reserves by 0.5 percentage point to 1.5 percent, the first time the rate fell below 2 percent in the institution’s 315-year history.


In a statement, the BoE said business surveys in the UK suggest that the pace of contraction in activity increased during the fourth quarter of 2008 and that output is likely to continue to fall sharply during the first part of this year. Surveys of retailers and reports from its regional agents imply that consumer spending has weakened. The outlook for business and residential investment has deteriorated.


The world economy appears to be undergoing an unusually sharp and synchronised downturn, and world trade growth this year is likely to be the weakest for some considerable time, it added.


CPI inflation fell to 4.1 percent in November. Inflation is expected to fall further, reflecting waning contributions from retail energy and food prices and the direct impact of the temporary reduction in Value Added Tax.


The MPC judged that, looking through the volatility in inflation associated with the movements in VAT, there remained a significant risk of undershooting the 2 percent CPI inflation target in the medium term at the existing rate level. Accordingly, the MPC concluded that a further reduction of 0.5 percentage pointto 1.5 percent was necessary to meet the target in the medium term.

No investment advice

The Company is a publisher and is not registered with or authorised by the Financial Services Authority (FSA). You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.