JohnCenaFan28
02-05-2009, 06:21 PM
The Bank of England has sent interest rates tumbling further to a new historic low of 1%.
Rate-setters cut borrowing costs from 1.5% - the lowest since the Bank was founded in 1694 - as they attempt to combat a worsening downturn.
The Monetary Policy Committee (MPC) decision - the first since the UK's recession was officially confirmed - continues the record-breaking run for lower rates.
It also follows International Monetary Fund (IMF) predictions that Britain will suffer more than any other advanced nation in the worst global recession since the Second World War.
The Bank has cut interest rates dramatically - from 5% last October - as it tries to offer relief to borrowers and businesses.
But the rate reductions have been a savage blow to savers, and many mortgage customers have been warned not to expect lenders to pass on the cut in full.
In a statement accompanying the decision, the Bank said the global economy was in the throes of "a severe and synchronised downturn".
"Business and household sentiment in many countries has deteriorated. The weakness of the global banking and financial system means that the supply of credit remains constrained...
"Credit conditions faced by companies and households have tightened further. The underlying picture for consumer spending appears weak," it said.
The Bank said previous rate cuts would eventually have a "significant impact" on aiding the economy, alongside the current weakness of the pound. But until these feed through, there is "a substantial risk" of undershooting its 2% inflation target with interest rates at 1.5%, it said.
-Nova
Rate-setters cut borrowing costs from 1.5% - the lowest since the Bank was founded in 1694 - as they attempt to combat a worsening downturn.
The Monetary Policy Committee (MPC) decision - the first since the UK's recession was officially confirmed - continues the record-breaking run for lower rates.
It also follows International Monetary Fund (IMF) predictions that Britain will suffer more than any other advanced nation in the worst global recession since the Second World War.
The Bank has cut interest rates dramatically - from 5% last October - as it tries to offer relief to borrowers and businesses.
But the rate reductions have been a savage blow to savers, and many mortgage customers have been warned not to expect lenders to pass on the cut in full.
In a statement accompanying the decision, the Bank said the global economy was in the throes of "a severe and synchronised downturn".
"Business and household sentiment in many countries has deteriorated. The weakness of the global banking and financial system means that the supply of credit remains constrained...
"Credit conditions faced by companies and households have tightened further. The underlying picture for consumer spending appears weak," it said.
The Bank said previous rate cuts would eventually have a "significant impact" on aiding the economy, alongside the current weakness of the pound. But until these feed through, there is "a substantial risk" of undershooting its 2% inflation target with interest rates at 1.5%, it said.
-Nova