The Bank of England cut interest rates to a record low as it hopes to help the country out of a recession. The British central bank cut its rate by 50 basis points to 1.0 percent, which is the lowest since the bank was organized in 1694. It follows on the heels of several other rate cuts as the bank is trying to keep the country’s economy on track.
The International Monetary Fund predicts that the UK economy will likely shrink by 2.8 percent in 2009, the biggest drop for any industrialized country in the world. While there isn’t much room left, some analysts and economists predict the bank will cut rates even further if things don’t improve quickly.
In Europe, the European Central Bank decided not to reduce rates since its last decrease brought the key interest rate to 2 percent. However, a number of analysts expect the ECB to resume rate cuts in the near future, as both Germany and Spain reported significant downturns in their economies.
ECB President Jean-Claude Trichet said in a news conference the euro will reap the benefits as a result of the bank’s decisions, but that “The overall risks to economic growth remain clearly on the downside.”
Useful Resources
