Bank of England slashes interest rates by 1.5 percentage points to 3%

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.