1.5 per cent interest rate cut
Updated on 06 November 2008
The Bank of England slashes interest rates to 3 per cent, their lowest for more than 50 years.
Even during the least recession there was not a 1.5 per cent cut.
Today's move shows how aggressively the Bank of England feels it needs to tackle the problems of our slowing economy, to try to avoid a deep and prolonged recession.
The 1.5 per cent cut was not expected, although a former member of the monetary policy committee had already called a rate reduction of this size.
The car industry has been desperate for a deep cut in rates as sales have fallen for six consecutive months - October's figures are the worst for 17 years.
Interview: Martin Weale
Martin Weale the Director of the National Institute of Economics and Social Research speaks to Channel 4 News about the dramatic rate cut.
'A huge moment in monetary history'
Faisal Islam, Channel 4 News economics correspondent, reponds to today's announcement.
"This is a monetary neutron bomb. We've never seen anything like this in recent history. It's May 1954 that interest rates were as low as 3 per cent.
"While the Bank of England has been independent, there's never been a vote of more than 0.75 per cent. Yet a majority of the committee has voted for 1.5 per cent to come off. A massive gamble.
"In the statement to accompany the announcement, there's some interesting language. They refer to their regional agents - the people in the economy who aren't seeing the big figures but it gives details on the ground. Their regional agents say things are pointing to a continued severe contraction in the near term.
"And they also complain that there's a very marked deterioration in the outlook for economic activity. They're obviously less worried about inflation now, even though inflation's at 5.2 per cent.
"Seeing through this, they're chosing to move now so they can explain it with the November inflation report that's coming out next Wednesday.
"The key question here is: is this going to get passed on? The CML have suggested in advance that all of it won't get passed on. Many mortgages have a system within them where you cannot lower the interest rate below, for example, 3 per cent.
"So there's lots of questions about whether this is going to work. A huge gamble and a huge moment in Britain's monetary history."
