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Interest rates cut to record 1.5%
The Bank of England cut interest rates by half a percentage point yesterday to a record low of 1.5 per cent as it battles to keep Britain from falling into a deep slump, and experts say borrowing costs will fall again next month.
- Reuters
- Published: 23:38 January 8, 2009
London: The Bank of England cut interest rates by half a percentage point yesterday to a record low of 1.5 per cent as it battles to keep Britain from falling into a deep slump, and experts say borrowing costs will fall again next month.
British interest rates have now fallen by 3.5 percentage points since October as policymakers caught on the hop by the severity of the downturn pull out all the stops to revive an economy facing its first recession since 1992.
Rates in Britain never fell below two per cent even during the Great Depression of the 1930s, underlining the scale of the current crisis hurting economies all around the world. In the United States, rates now range between 0 and 0.25 per cent.
Economists said the BoE would cut again next month and interest rates could even fall below one per cent, perhaps alongside a signal they would stay very low for a very long period of time.
"They are still in cutting mode but have taken their foot off the gas this month," said Alan Clarke, UK economist at BNP Paribas.
The pound, down 15 per cent against the euro since the BoE started its aggressive interest rate campaign in October, rose after the decision as many in the market had been pricing in a bigger move after the last month's one point reduction.
Short sterling interest rate futures also turned negative as markets priced in less aggressive monetary easing ahead.
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