MPC cut interest rates to 2%

by Richard Kilner

Story link: MPC cut interest rates to 2%

The Bank of England’s Monetary Policy Committee (MPC) has reduced interest rates by 100 basis points to 2%.

The cut has been made amid indications that the economic downturn within the UK is worsening, and follows the previous cut of 150 basis points made at the last meeting.

In addition to the bank recapitalisation, although securing the banks against widespread collapse, has failed to reinvigorate the credit markets, which remain extremely tight and are unlikely to loosen in the near future.

Inflation, according to the official measure of CPI, stands at 4.5%, and is projected to continue falling due to weaker demand and lower commodity prices.

The MPC has forecast a possible risk of CPI falling beneath the 2% target, and the cut in interest rates has been made to try and resist this medium term danger.