UK interest rates at new record low of 1%
As widely expected, the Bank of England’s Monetary Policy Committee (MPC) has cut interest rates half a percentage point to a new record low of 1%, in a bid to fight off a prolonged recession.
The cut comes just two weeks after official figures confirmed the UK had entered a recession.
Aggressive cuts have been made to the base rate since October, when rates stood at 5%. Last month, the MPC cut rates to 1.5% – the lowest level since the Bank was established over 300 years ago.
However, many groups have been warning this week that interest rates should be left alone since the real issue is to kick-start lending and thus far, a reduction in rates has failed to do this.
Yesterday, the National Institute of Economic and Social Research (NIESR) said there was little point in reducing interest rates further.
The NIESR, an influential think tank, believes that a cut in interest rates this week would not benefit the economy but said other moves such as the Bank of England purchasing corporate bonds would be better.
Last month, the International Monetary Fund (IMF) revised its forecast for world growth this year to 0.5% – the lowest since World War II.
While the news is grim for economies around the world, the IMF said the UK will see its economy contract by 2.8% this year – the worst of any western country.
In other news today, the Halifax latest house price survey has revealed a rise of 1.9% in January in house prices.
Halifax, which is the UK’s largest mortgage lender, said that the rise last month offset December’s fall of 1.6% but warned that too much attention should not be taken to any single month.
The lender said that over the last three months, prices have declined by 5.1% and over the year, have fallen by 17.2%.
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