Finance

Finance

UK cuts key rate to 1%

05 February 2009 14:27 (UTC +04:00)

Baku-APA-Economics. The Bank of England has reduced interest rates to a record low of 1% from 1.5% in an attempt to boost the shrinking economy, BBC reported.
This marks the fifth interest rate cut since October, as the Bank seeks to encourage more lending.
The decision comes after official data showed the UK had entered a recession in December, after two successive quarters of economic contraction.
But some business groups argue rate cuts will not ease the economic crisis.
The Bank Rate has now been reduced from 5% in October last year.
In a statement accompanying the rate cut, the Bank of England said it had noted at its meeting that "although the transmission mechanism of monetary policy was impaired, the past cuts in Bank Rate would in due course nevertheless have a significant impact".
The rate cut comes against a backdrop of gloomy economic data.
The economy contracted by 0.6% between July and September, and by 1.5% from October to December, Office for National Statistics (ONS) figures showed.
And the ONS also said UK unemployment had risen to 1.92 million in the last quarter of 2008 - the highest level since 1997.
Figures from the Purchasing Managers’ Index (PMI) released earlier this week showed manufacturing remained weak last month, despite a slight improvement on December.