The Bank of England slashes UK interest rates by 1.5% to 3%!

Posted by admin on 6 November, 2008 under Business news | Be the First to Comment

In a move to stimulate the UK economy the Bank of England has cut interest rates a massive one and a half percent to 3%.

This move was bigger than expected – shock treatment or panic?

This news is certainly welcomed by businesses and property owners across the UK and will hopefully spark some confidence into the economy. This rate is the lowest it has been since May of 1954 and is certainly more than was expected by most experts and economists, but certainly a welcome move.

The cut in interest rates last month from 5% to 4.5% which was inline with other World Bank cuts was not enough where we have seen other central banks, like America slash rates to 1% to help stimulate the US economy. The European Central Bank (ECB) has cut Eurozone interest rates to 3.25% on the same day, representing a half point cut, as the ECB responds to the region’s rapid plunge into recession. There has been speculation that the ECB would have made a larger cut, but it seems they have decided that a larger percentage cut might have appeared to be panic reaction.

Deepening recession

With a deepening recession looming and with companies in receivership and liquidation on the rise together with redundancies increasing the Bank of England need to show commitment to helping industry. There have been widespread calls from industry leaders for a major cut and we will wait to see what this move by the Bank of England will do for confidence in the UK economy.

World stock market volatility continues

We have seen yet more volatility on world stock markets with the Nikki falling by more than 6.5% over night and with the FTSE initially falling by more than 160 points this morning (over 3.5% fall). Also, reality has hit home for Barack Obama in the US, with the Dow Jones falling by 486 points yesterday on the back of his election to be the 44th US president. Barely has the dust settled and the posters for the election run been taken down, when Obama needs to dig in and get to work on sorting out the financial crisis in his country.