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A cut of 1% announced
A further 1% cut to the Bank of England base rate has meant that the rate is now at the level it was in 1952.
The Monetary Policy Committee (MPC), consisting of nine members, has decided to act aggressively and stave off the threat of a prolonged and crippling recession. The Bank of England had been accused of acting too slowly in the preceding months to the last rate cut of 2.5 per cent by many.
The Bank’s Governor, Mervyn King, said that “We will take whatever action is required to steer the economy back into calmer waters”.
The rise in unemployment and downturn in manufacturing has alerted the Bank to the fact that Britain’s economy is shrinking at a fast pace.
Household spending fell for a second quarter in a row in the three months to September, the biggest drop since the beginning of 1995.
Some are worried that once again the banks will not pass on the rate cut to their customers as they are not legally bound to do, making the MPC a toothless tiger with little sway over lending.
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