Today’s decision followed a two-day meeting of the Bank’s Monetary Policy Committee. The move, which represents the first cut in interest cuts since February last year, has been prompted by fears that the UK may be moving towards recession.
Poor economic indicators across the Atlantic last month, twice forced Federal Reserve chairman Alan Greenspan into lowering US rates.
The rate cut was welcomed by the business community, some sections of which had become increasingly vocal in its calls for a change in MPC policy.
‘It’s been a long time coming, but this decision will help reassure UK businesses and investors at a time of growing economic uncertainty,’ said Ian Fletcher, chief economist at the British Chambers of Commerce.
The Confederation of British Industry, however, called the rate cut ‘well-judged’.
‘This cut has come at the right time,’ said CBI chief economist Kate Barker.
‘Firms are finding the economic tea-leaves harder than usual to read. Companies needed this cut to bolster their confidence and to sustain investment, which is vital to the UK’s long-term future. Low inflation gives room for a cut now without damaging stability,’ she said.
In January the nine members of the MPC voted by a majority of one to leave rates alone – just days after the US move.
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