Bank of England cuts interest rate by 0.5 percent to 4.5 percent

The Bank of England, the European Central Banks and the US Federal Reserve all dropped half a point off their key interest rates, since the aftermath of the 9.11 this is the first unscheduled rate move.

Switzerland, Canada and Sweden all make similar cuts. Australia earlier this week dropped a whole percentage point. As the global financial fiasco became worse this week, and the threat of an even deeper and more drawn-out slump become imminent urgent action by the Worlds leaders was called upon.

With the Bank of England reducing the interest rate to 4.5 percent it marks the biggest rate drop since November 2001, and takes the rate to the lowest in two years. The US cut down to 1.5 percent and the ECB to 3.75 percent.

It’s been said by some economists that the sheer weight of the crisis facing the British economy could me we see rates reduced as low as 2.5 percent.

A joint statement by the central banks said: “Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. “The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability”.

The MPC welcomed the government’s plan to recapitalize the major British banks and said that interest cuts alone could not be expected to resolve the current problems in the financial market.

Source: Guardian