Interest rates cut to record low
The Bank of England has announced interest rate cuts of 0.5%. This means interest rates have now hit the lowest level in its 315 year history at 1.5%.
This is the 4th rate cut we have seen since October 08 and even now some feel this move was "too timid" and that the Bank should have cut rates even further.
The Bank said the level of contraction in business had "increased during the 4th quarter of 2008 and that the output is likely to continue to fall sharply during the 1st part of this year."
The Manufacturers' association EEF believe a larger cut should be made now, rather than taking a measured approach.
Hetal Mehta, senior economist from the Ernst and Young Item Club comments: "With survey data continuing to languish at record lows – manufacturing and services surveys in the past few days have confirmed that activity is falling sharply – we see no reason for the Bank to hold back in cutting interest rates to 1% or below in the coming months."
Consumers with a tracker, interest-only and variable rate mortgages where the rate cut is being passed on may well be celebrating, but for the millions with fixed rate deals the rate cut is insignificant.
The Bank hope that this interest rate cut will lower borrowing costs for companies and consumers, which will help them weather the current economic climate.