The Bank of England has cut its benchmark interest rate by 0.5 percent to try to prevent the British economy from falling into a deep and lasting downturn.
This was the fourth reduction by the UK central bank in as many months and brings the cost of borrowing down from five percent last October to an all-time low of 1.5 percent. Rates have never been below two percent before in Britain, even during the Great Depression of the 1930s, and they are now at their lowest level since the central bank was founded more than 300 years ago. Analysts say another reduction next month looks a sure bet and that interest rates could fall below one percent. Attention is shifting to what can be done once rate cutting is exhausted, a process known as quantitative easing. A British government spokesman has denied reports that it is about to print more money to stimulate demand. The latest cut comes against a background of residential property prices having fallen 20 percent from their peak.