UK interest rate receives further cut

The UK interest rate has been cut for the sixth time as economies around the world attempt to stem the effects of the current global climate of uncertainty.

On Thursday October 4, the Bank of England’s Monetary Policy Committee announced a further 0.25 per cent cut, a move which brings the UK base rate down to 4.5 per cent, its lowest level in nearly 40 years.

In a statement describing the decision, the Bank said that it believed the domestic economy of the UK would be less adversely affected than the US by the recent downturn in worldwide economic performance.

“But the weaker world outlook and increased uncertainty have set UK back business and consumer confidence – and may – for a time, restrain business and household spending,” the statement warned.

Recent reports on UK economic sectors have produced conflicting indications of the relative performance of various sectors of the economy. A report from the CBI on the retail supply sector indicted that this market had performed well, but a report on the UK service sector indicated that this area of economic activity had declined for the first time in three years.

A report on Wednesday from the Halifax showed that house prices had stalled last month, and the Halifax predicted that house prices would slowdown further in the next few months.

However, one of the main factors standing in the way of a cut in the interest rates is the UK inflation figure has risen above the government’s 2.5 per cent target, in August the inflation rate hit 2.6 per cent.

On Tuesday the US Federal Reserve announced the second 0.5 per cent rate cut in the wake of the terrorist attacks on the US. The US base rate now stands at 2.5 per cent. (SP)