Bank interest rate cut to 1%

05 February 2009 / by Rebecca Sargent
The Bank of England's Monetary Policy Committee (MPC) has today decided to cut interest rates to just one per cent – a new record low since the bank was formed in 1694.

The cut of 0.5 per cent is the fifth consecutive cut since October 2008, and was correctly predicted by many city experts, despite appeals from others for the MPC to keep rates unchanged at 1.5 per cent this month.

While most experts are claiming that interest rate cuts alone are not enough, the MPC recognised this but said that the effects of previous cuts have not yet been felt.

In a statement the Committee said it noted that "although the transmission mechanism of monetary policy was impaired, the past cuts in Bank Rate would in due course nevertheless have a significant impact."

But many believe that the interest rate cut will do more harm than good. Ben Thompson, director of mortgages at Legal and General said: "Today's cut will only help a fortunate few borrowers and it certainly won't help savers, or pensioners."

Andrew Hagger of added: "You really have got to question if there is any point in pursuing panic driven, rate slashing strategy, as apart from the fortunate minority on a base rate tracker mortgage, everyone else, whether they are a saver or a borrower, is getting a poorer deal."

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