Press Room

Bank rate cut makes history

In an unprecedented move, the Bank of England has today cut interest rates to 1.5 per cent, the lowest level since its inception in 1694.

Reports indicating a contraction in business volumes in Q4 2008 led the Monetary Policy Committee to expect a sharp fall in output over the first half of the year, prompting their vote to reduce the bank rate by 0.5 percentage points. This brings the total number of rate cuts since October to four.

There is speculation that 2009 could see the base rate plummet below one per cent, and banks start to charge customers to look after their savings, but few industry analysts are predicting a return to negative interest rates – a precedent set by Swiss banks in the 1970s.

News of the cut comes in the same week as Chancellor Darling’s revision to his economic forecast. In an interview, he described Britain as being "far from through" the recession. He declined to issue a new forecast, commenting only that he expected 2009 to be “difficult.”

Internet link: Bank of England