Breaking News- Bank of England cuts interest rate more than expected.
Craig:
Here is some good news to go with the morning coffee.
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Source:Excerpts from Bloomberg
Top News
Thu, 5 Nov 1998, 8:44am EST
11/5 Bank of England Cuts Benchmark Rate More-Than-Expected Half-Point to 6.75%
London, Nov. 5 (Bloomberg) -- The Bank of England surprised
investors by chopping its benchmark interest rate a greater-than-
expected 50 basis points to 6.75 percent, the second cut in a
month, saying it expects lower growth and inflation next year.
The move follows cuts this week by Spain, Portugal and
Sweden and by Denmark today, and reflects recession in Asia and
Russia as well as a weaker domestic economy, the bank said.
This is the first time the bank has changed borrowing costs
by as much as half a point since gaining independence in May,
1997, taking the rate to its lowest since Aug. 1997, and
indicates it is more concerned about growth than many thought.
''They're clearly worried by the economic environment and
have taken a more dramatic step than usual to prevent that
deterioration from gathering speed,'' said Keith Edmonds, chief
analyst at IBJ International in London.
Today's move, the first half-point move since the central
bank raised the rate 50 basis points in Feb. 1995, comes as the
Bundesbank rebuffed pressure from German Finance Minister Oskar
Lafontaine, who attended today's Bundesbank central council
meeting, to cut its 3.30 benchmark rate, the lowest in Europe
bar Switzerland and Austria.
Analysts now expect the Bundesbank to resist any further
political pressure and leave cuts in borrowing costs to the
European Central Bank next year.
Federal Reserve Lead
The U.K. reduction, which overturns the central bank's
practice of changing rates in quarter-point moves since May,
1997, was immediately followed by similar cuts in base rates by
leading U.K. commercial banks, including Barclays Plc, National
Westminster Bank Plc and Lloyds TSB Group Plc, which all cut
half a point to 6.75 percent.
It follows a quarter-point cut by the U.S. Federal Reserve
Board three weeks ago prompted by recession in Asia and Russia
and fears of a world economic slowdown. While all 18 economists
surveyed by Bloomberg News expected the U.K. central bank to
lower its benchmark rate, only Goldman Sachs predicted a half
point reduction.
Today's larger-than-expected move pushed the pound down to
2.7491 deutsche marks from 2.7681 earlier today and drove the
yield on the government's 10-year benchmark bond to down 2 basis
points to 5.02 percent.............
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