6 Nov

MPC makes large rate cut

MPC makes large rate cut

The Bank of England's monetary policy committee (MPC) has announced the largest base rate cut since 1981 in what it states is a reaction to indications that inflation will soon plummet.

It revealed at noon today that it was slashing the base rate from 4.5 per cent to three per cent, the lowest level the rate has been since the MPC was set up in 1997.

Until today the lowest base rate under the MPC has been 3.5 per cent from July to November 2003.

In its statement on the decision, the MPC said a combination of a fading of the effects of fuel and food prices, lower commodity costs and the economic slowdown would all lead to lower inflation.

By making such a cut, the bank may help bring down the cost of mortgages, with those on tracker deals benefiting immediately.

This could in turn stimulate the property market, helping to bring about a recovery.

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