Business | Economy
Bank of England slashes interest rates by 1.5 percentage points to 3%
The Bank of England unexpectedly cut the benchmark interest rate by 1.5 percentage points as policy makers tried to contain the damage caused by a recession.
- Bloomberg
- Published: 16:25 November 6, 2008
- BoE unexpectedly slashed interest rates by 1.5 percentage points.
- Image Credit: Bloomberg
London: The Bank of England unexpectedly cut the benchmark interest rate by 1.5 percentage points as policy makers tried to contain the damage caused by a recession.
The nine-member Monetary Policy Committee, led by Governor Mervyn King, slashed the bank rate to 3 percent.
BoE says big risk of inflation undershooting target
"There has been a very marked deterioration in the outlook for economic activity at home and abroad," the BoE said in a statement accompanying the decision.
Economists had expected a rate cut of just 50 basis points.
"Since mid-September, the global banking system has experienced its most serious disruption for almost a century."
The BoE had revised down its forecast for inflation which "at prevailing market interest rates, contains a substantial risk of undershooting the inflation target."
Inflation is currently running at 5.2 percent, well above the BoE's 2 percent target, but is expected to fall sharply as the economy weakens and commodity prices fall.
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