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Wednesday 19th of January 2011
January 8, 2009    

Interest rates cut to record low of 1.5%

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by Kay Murchie
”Interest

Interest rates have been cut to 1.5% today - the lowest level since the Bank of England was established 315 years ago.

The cut of 0.5% was widely expected by economists as attempts continue to boost the economy and bring down inflation.

Since the level of 5% in October, the Bank has slashed rates four times, which is in a co-ordinated move around the world as central banks try to stave off a prolonged recession.

The cut also follows a run of bad news for the UK economy as unemployment continues to rise and house prices plunge further.

While the news will be welcomed by many, EEF, the manufacturers’ association, said a further cut was needed and today’s move was ‘timid’.

Hetal Mehta, senior economist from the Ernst & Young Item Club, said today’s reduction was ‘appropriate‘ but there should be further cuts in the coming months.

The news comes just one day after Chancellor Alistair Darling said Britain was far from through the recession and that 2009 will be a tough year.

Meanwhile, Business Secretary Lord Mandelson, is expected to warn today that there is a risk from deflation.

A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.

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