5 Feb

Base rate drops to 1%

Base rate drops to 1%

The Bank of England has announced that the official base rate has been reduced further.

A cut of 0.5 per cent was agreed at this month's monetary policy committee (MPC) meeting, bringing the rate down to one per cent.

It sets the rate at a new all-time low and the MPC explained that the move came due to the risk of inflation undershooting its target in the medium term.

The base rate has now been cut by four per cent since September of last year and the latest reduction could lead to cheaper interest payments for mortgage holders.

Commenting on the decision, Liberal Democrat shadow chancellor Vince Cable said: "The Bank has to do what it can to reduce the cost of credit in the face of deepening recession. However, there is now only very limited scope for cutting interest rates."

Clues about the future direction of the base rate may be provided on February 18th, when the minutes of the MPC meeting reveal how each of the nine members voted.

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