Shock As Interest Rates Slashed
The Bank of England has decided to cut interest rates by a huge margin of 1.5% today. Normally, cuts or additions to the interest rates in the UK are included in increments of 0.25% or 0.5%.
The deepening economic crisis has forced the hand of the Bank's Monetary Policy Committee, as they try to stave off deflation. An official statement by the bank noted that there has been a marked deterioration in the outlook for economic activity, and that commodity prices had fallen sharply.
It added that since mid-September, the global banking system has experienced its "most serious disruption for almost a century".
It continued: "The availability of credit to households and businesses is likely to remain restricted for some time. As a consequence, money and credit conditions have tightened sharply.
"Consumer spending has faltered in the face of a squeeze on household budgets and tighter credit. Residential investment has fallen sharply and the prospects for business investment have weakened."
Richard Lambert, director-general of the Confederation of British Industry (CBI) called it a "bold and welcome move" and business leaders, along with trade unions, immediately welcomed the rate cut.
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