9 Oct

Bank slashes interest rates

Bank slashes interest rates

The Bank of England has announced a 0.5 per cent cut in interest rates, the largest reduction in the base rate since November 2001.

In a move that came a day earlier than the scheduled announcement of the monthly rate decision, the monetary policy committee (MPC) revealed that it was taking the action in collaboration with the US Federal Reserve, the European Central Bank and the central banks of Canada, Sweden and Switzerland.

The MPC said that the inflationary prospect had shifted "decisively to the downside", with too tight a monetary policy likely to lead to consumer price index inflation falling well below the two per cent target set by the government.

Consumers with tracker mortgages will automatically benefit, while the reduction in the base rate may lead to mortgages becoming cheaper in general if lenders pass on the cut.

The news came hours after the government announced a new £200 billion facility to increase liquidity in the banking sector, a move the MPC welcomed.

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