Emergency base rate cut to 4.5%

by Gill Montia

Story link: Emergency base rate cut to 4.5%

The Bank of England’s Monetary Policy Committee has cut the base rate by 0.5%, to 4.5%.

The decision to implement the long-awaited reduction has been made one day early, amid more market turmoil and accompanying news of the Government’s plan to spend £50 billion recapitalising the UK’s High Street banks.

The Bank says the move is in response to the recent intensification of the financial crisis, which yesterday saw Royal Bank of Scotland’s share price fall by nearly 40%.

The action has been co-ordinate with other central banks around the world: the European Central Bank made a cut from 4.25 % to 3.75% and the US Federal Reserve has shaved a further 0.5% off interest rates.

News of the UK cut has been accompanied by a statement that inflationary pressures have shown signs of mitigation.

Meanwhile, Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling continue to unpack the £50 billion rescue package which will also provide £450 billion of support in loans and guarantees.