Bank Of England cuts rate to 5.75%
Weaker outlook prompts Bank of England
into first rate cut for 20 months
February 8, 2001: 7:05 a.m. ET
LONDON (CNN) - The Bank of England cut interest rates to 5.75 percent on Thursday, as
expected, its first reduction in 20-months.
The U.S. Federal Reserve cut interest rates by one percentage point in January to counter
fears of recession in the world's biggest economy. The BoE is concerned a U.S. slowdown
could impact the UK economy.
The BoE is "worried that European growth has been affected by a slowdown in the U.S.,"
Vicky Pryce, an economist at KPMG, told CNN before the rate cut. "There is more evidence
that the UK is slowing, and the bank will respond."
The UK economy has enjoyed an unprecedented period of stability recently, with the BoE able
to resist tweaking monetary policy for almost two years.
Steve Barrow, economist at Bear Stearns, told CNN.com earlier this week: "A sharper than
expected decline in GDP from 0.7 percent in quarter three to 0.3 percent in quarter four, will
probably swing the balance in favour of a rate cut."
Minutes from the MPC's last meeting showed the nine-member panel voted by a narrow margin
of five to four to keep rates on hold at 6 percent.
Those who voted for a cut – the BoE's chief economist Charles Bean, Christopher Allsopp,
Sushil Wadhwani and DeAnne Julius, argued that a reduction in interest rates to 5.75 percent
could offset a loss in consumer and business confidence from any weakness in the U.S. and
world economies. |
