AKC News // Bank of England brings UK rates to record low

The Bank of England today cut interest rates from 1% to 0.5% - a new record low.

The bank said it will buy assets worth a total of £75 billion sterling in a drive to help the British economy by expanding the money supply.

The latest rate reduction means the Bank of England has now cut interest rates for six months running by a total of 4.5 percentage points.

The reduction in the bank's main lending rate to 0.5% left British borrowing costs at their lowest level in the bank's 315-year history.

Faced with Britain's first recession in 18 years and falling inflation, the central bank extended a series of sharp cuts since October, when interest rates stood at 5%.

Bank of England Governor Mervyn King last month wrote to Britain's finance minister, Chancellor of the Exchequer Alistair Darling, seeking permission for quantitative easing - a measure also being considered by the US Federal Reserve among others to get the economy back on track.

With interest rates so low and having little traction, quantitative easing is seen as the next best option, modelled on the Japanese experience of the 1990s.

Source: RTÉ Business

Date : 05-03-2009