Bank rate cut by a further 1 percent

The Bank of England has cut the base interest rate buy a further 1 percent in the third rate cut in as many months. The rate cut took place following the December Monetary Policy Committee Meeting, where it was decided by committee members that a further cut in interest rates was necessary in order to try and boost the flagging economy through increasing consumer spending.

This is the third interest rate cut since October, and has resulted in the base rate falling from 5 percent to just 2 percent following a series of drops. In October the central bank cut the base rate by 0.5 percent to 4.5 percent.

In November there was a large base rate cut of 1.5 percent, which took the base rate to just 3 percent. And with the latest 1 percent base rate cut interest rates are now at just 2 percent, which is the lowest level in nearly sixty years.

The Prime Minister Gordon Brown said he hoped that banks would pass on the rate cuts to borrowers in order for the plan to boost the economy to be effective, although many industry officials are concerned that many will not pass on this rate cut.

Mr Brown said: “If the banks pass the interest rate reduction on, and I hope and believe that they should do so, then it’s of benefit to homeowners and businesses right across the country.”

An official from the British Chambers of Commerce stated after the most recent announcement: “There wasn’t quite the shock value of the dramatic one-and-a-half point reduction in November. But we shouldn’t forget the scale of the Bank of England’s action. The cost of borrowing has been more than halved since early October, as the Bank got to grips with the rapid decline in confidence and spending.”