Bank base rate cut to 5.25%
The Bank of England’s rate-setting committee has cut interest rates to 5.25% from 5.5% in an attempt to stimulate growth in the UK economy.
This follows recent rate cuts by the US Federal Reserve, which sliced rates from 4.25% to 3% amid fears of the widening impact of the credit crunch.
Many analysts expect more UK cuts this year, but say inflation fears will stop the UK cutting rates as much as the US.
The Bank said in January that the risk of inflation had “worsened markedly”.
While the most recent UK inflation data showed that national consumer price inflation remained at 2.1% for the third month in a row in December, energy prices have increased substantially since then.
The rate decision came shortly after E.On became the fifth major power company to raise gas and electricity prices this year.
Further cuts
The employers’ organisation the CBI welcomed the cut and said it was pleased there had not been a bigger cut.
“It is clear that it is a delicate balance with inflation pressures,” said the CBI’s Ian McCafferty.
“A quarter point now and then watching very carefully for how inflation develops in the coming months is the best strategy.”
But the British Chambers of Commerce disagreed.
“Threats to growth are much more acute now than risks of higher inflation, and we would have welcomed a bold UK move to 5% today,” said its economic adviser David Kern.
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