To no-one's great surprise, the Bank of England's Monetary Policy Committee (MPC) announced (external website) at midday today its decision to cut UK interest rates by 25 base points, to 5%.
The MPC's decision to cut rates this month had already been telegraphed by Bank of England governor Mervyn King in recent weeks.
Speaking to the Commons Treasury Committee on 26 March 2008, King stated that the "financial crisis has moved into a new and different phase", characterised by a worldwide fragility in confidence in financial markets. Further rate cuts were therefore required to help the financial sector "decompress" from the recent tightening of credit markets.
It remains to be seen how this decision will affect inflation (subscription required), and how this in turn will feed through into pay awards. As noted in our latest monthly analysis of pay settlements (subscription required), the median award currently stands at 3.5%, some 0.6 percentage points below the headline rate of retail price inflation (RPI), currently 4.1%.
If your organisation has recently settled its annual pay award, and you would like to contribute to our monthly analysis of pay trends, you can submit details of your organisation's latest settlement for inclusion in the IRS pay databank by completing the online form.
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