The Bank of England's Monetary Policy Committee (MPC) announced at midday today that UK interest rates will be cut by 100 base points, to 2% (external website) - their lowest level since 1939. The latest cut represents part of a global wave of interest cuts taking place today (external website), starting in the Asia-Pacific reason in the wee small hours, continued by the MPC, and finishing with a 75 base points cut from the European Central Bank (external website), which will take effect from 10 December 2008.
Today's third successive cut in UK interest rates was widely expected, following cuts of 50 base points in October, and of 150 base points in November, which collectively took interest rates from 5% to 3%.
The latest cut will please the British Chambers of Commerce, whose chief economist David Kern earlier this week called for a 100 base points cut (external website).
As usual, the CBI was the first professional body to comment on the latest interest rate decision (external website). CBI Chief economic advisor Ian McCafferty welcomed the move, commenting that: "The economy needs a significant monetary stimulus and the Bank has clearly decided this will be best achieved by another big cut in interest rates. What is critical for business and consumers alike is that this reduction is passed on."
Scant seconds later, Richard Snook, senior economist at the CEBR (external website), weighed in, noting that: "The Bank will soon have played all of its trump cards to boost the economy, so the key question is now; will this action be effective?"
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