Bank of England cuts lending rate to 4.5%

The Bank of England has reduced the UK interest lending rate to 4.5%.

The decision to cut interest rates had been widely expected in an effort to improve GDP growth, encourage consumer speeding and prevent recession in the manufacturing industry. Interest rates had remained at 4.75% since August 2004.

Business leaders welcomed the decision, but warned that further interest rate cuts might be needed.

The Confederation of British Industry (CBI). Director General Sir Digby Jones said: "This cut will be a catalyst for growth and will provide an essential boost to consumer and business confidence."

However, Sir Digby warned: "The Bank will want to keep a watchful eye on the economy to gauge the impact of this reduction as a further cut might be necessary later in the year."

David Frost, Director General of the British Chambers of Commerce (BCC) said that the Bank’s Monetary Policy Committee (MPC) had made the right decision. He said: "The economic situation has worsened, and the case for a cut in interest rates was compelling.

"While today's cut in interest rates should alleviate some of the most acute pressures facing the economy, the UK economic climate has worsened and we are facing new dangers. Given the risks facing UK businesses, and manufacturing in particular, we urge the MPC to remain vigilant. Further interest rate cuts should be considered later in the year."

Kevin Hawkins, British Retail Consortium (BRC) Director General also welcomed the decision, although he said it was “long overdue”.

He said: "The cut in interest rates will take several months before it works through to consumer behaviour on the high street and needs to be reinforced by further reductions over the next few months if the economy continues to slow down."

(KMcA/SP)