Bank of England Cuts Main Rate a Half Point to 1%

[antimatter98]

Source: Bloomberg

The Bank of England cut the benchmark interest rate to the lowest since the bank was founded in 1694 to help drag the British economy out of the deepening recession.

Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=afu0SjkxN42w&refer=home

[Turborama]

1. Just to put that in perspective...

UK reduces interest rates to 1%
http://news.bbc.co.uk/2/hi/business/7871932.stm

Looks like they are headed towards deflation...

Bank Of England: Countdown To Zero

The Bank of England was expected to cut interest rates to the lowest level in its 315-year history on Thursday to somewhere between 1.0%-1.5%, from 2.0%, in a bid to jolt the British economy out of a miserable recession. But with economic activity not expected to pick up until late 2009, expect interest rates to fall close to zero in February.

What happens then will be somewhat uncharted territory for Britain's economic policymakers, although some form of "quantitative easing"--a stuffy term for pumping more cash into the economy--is expected. With deflation now a real possibility in the middle of this year, and with Britain's banks still holding back on lending, the central bank now has little choice but to keep slashing.

=snip=

A world of zero interest rates will not be good news for savers, who will find their returns drying up as banks hack away at savings rates. (See "Saving Yourself From The Bank Of England.") But trying to protect savers by putting a freeze on interest-rate cuts would likely come at a huge cost to the wider economy, which needs more spending and more lending in this unprecedented environment.

The longer the slump lasts, the bigger the threat of deflation. Central bankers in both Europe and the United States have promised to do all they can to keep consumer prices from entering a downward cycle, which would have a knock-on effect on company profits, employee wages and the wider health of the economy.

Read more: http://www.forbes.com/2009/01/08/bank-england-rates-markets-econ-cx_ll_0108markets09.html?partner=whiteglove_google

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[CatholicEdHead]

2. Lowest since 1694?

They only have one more move down to our level of basically zero. They hid their equivalent of our late M3 report for how much currency is circulating a few weeks ago.

[Turborama]

3. Do you know anything about currency markets?

If so, how do you think this is all going to play out re: $ vs £ ?

[CatholicEdHead]

4. I would ask this question in the daily Stock Market Watch thread

you will get a better answer there.

[sutz12]

5. I think that part of the credit crunch is due to interest rates being so low...

it is no longer profitable to loan money.

:shrug: