The Bank of England is expected to cut interest lending rates to the lowest since 1951 today.
Mervyn King, the Governor of the Bank, told MPs last week: “We may need to cut Bank Rate more than we would otherwise have done. We will take whatever action we feel is necessary on interest rates to steer the economy back into calmer waters.”
Willem Buiter of the London School of Economics, a former member of the Bank’s Monetary Policy Committee, predicted the Bank rate would eventually be reduced to zero, and called for this to be implemented immediately… Mr Buiter forecast that the Bank would cut the rate to 1.5 per cent on Thursday.
The Monetary Policy Committee, in an effort to boost people’s confidence that the financial system is safe and that it functions properly, is taking all the necessary steps to avoid problems that may lead to wider disruption across financial system. However, a dramatic reduction in the Bank’s rate from 4.5 to 3% last month – the lowest level in more than half a century, has so far failed to revitalize the British economy. Lending to businesses or homeowners has stalled, prompting fears the downturn could be worse than forecast.
Since last month’s decision, official data has confirmed that Britain’s economy, though only fractionally, shrank 0.5% in the three months to September. A second consecutive quarterly contraction would put Britain in recession.
If the interest rates are slashed to 2% – will equal their lowest level in more than 300 years.
Update: The Bank of England cut its rates by 100 basis points for an interest rate of 2.0%.