BoE drops interest rates to 4.5%
Personal insurance
9th October 2008
In a surprise move, the Bank of England (BoE) has dropped interest rates by 0.5 points to 4.5 per cent.
It made the emergency cut yesterday as part of a coordinated move with the European Central Bank and US Federal Reserve.
The bank's monetary policy committee (MPC) held its meeting yesterday (Wednesday) in advance of its normal schedule.
"Inflation is likely to rise further to above five per cent in the next month or two, in large part as the full effects of already announced increases in the price of domestic energy are felt," the MPC said.
It forecast inflation would then decrease, with the contribution from retail energy prices falling and the spare capacity margin in the economy rising.
This cut marks the first time the BoE has reduced the basic rate of interest by more than 0.25 per cent since November 2001 and the first time it has implemented an emergency cut since the aftermath of the terrorist attacks on September 11th 2001.
