The Monetary Policy Committee, led by Governor Mervyn King, reduced the bank rate to 2%, the lowest level since 1951

As expected, the Bank of England (BOE) on Thursday slashed its key interest rate to the lowest in more than five decades, as the British central bank scrambles to revive the economy, which is already in a recession.

The Monetary Policy Committee, led by Governor Mervyn King, reduced the bank rate to 2%, the lowest level since 1951. Interest rates have never gone below this level since the BOE was created in 1694.

The move matched the median forecast of economists.

The last time the BOE cut interest rates from 3% to 2% was October 26, 1939, after Britain entered the Second World War.

The British economy shrank in the third quarter for the first time since the recession of the early 1990s and analysts expect the pain to intensify into next year. Data released recently have only served to deepen the gloom surrounding the outlook for the UK economy.

The BOE’s move was the latest in a series of steps across the world today. Sweden’s central bank also cut its rate today by the most since 1992. The Riksbank lowered its key rate by 1.75% to 2%.

New Zealand’s central bank cut its rate by a record 1.5% to 5%, and Bank Indonesia reduced its rate to 9.25% from 9.5%. The Frankfurt-based European Central Bank (ECB) is widely expected to cut its key lending rate by at least a half-point to 2.75% at the conclusion of Thursday’s Governing Council meeting.

source: Indiainfoline

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