US cuts rates, hopes for UK bank rate next week

In an effort to fight off a recession, the US Federal Reserve has cut interest rates by a further 50 points.

The cut follows last week’s dramatic 75 point cut which is the biggest easing of US monetary policy since the early 1980s and a move which aims to prove to critics that the Federal Reserve is one step ahead of the weakening economy.

Following the sub-prime mortgage crisis in the US, financial markets have been struggling and this has spread across most global economies and caused a widespread tightening of lending criteria.

In a written statement about their decision to further cut rates, the Federal Open Market Committee (FOMC) said: financial markets remain under considerable stress and credit has tightened further for some businesses and households.

Across the Atlantic, the UK is anticipating a cut in interest rates next week from the Monetary Policy Committee. It is now hoped that the Monetary Policy Committee, with the newly reappointed Mervyn King continuing in his role of Governor of the Bank of England, will take the decision to cut interest rates in the forthcoming meeting to be held on 6 and 7 February.

The latest Bank of England figures were worse than expected as the number of new mortgages approved fell to a 13-year low. The data shows that in December 2007, 73,000 new mortgages were approved compared to 117,000 in December 2006, a decline of 37%.

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