Bank of England cuts base rate
Published On 6 December 2007
The Bank of England has today (December 6th) voted to cut the base rate of interest by 0.25 percentage points to 5.5 per cent.According to the Bank's statement, the Monetary Policy Committee (MPC) voted for a cut in order to stay on track for a medium-term adherence to the target level of consumer price index inflation of two per cent.
Despite two years of growth in the UK, the Bank pointed to indicators of a slowdown as factors in its decision.
While business and consumer spending have moderated in line with expectations, the recent instability in financial markets and subsequent credit squeeze present "downside risks to the outlook for both output and inflation further ahead".
As October's CPI inflation stood at 2.1 per cent, the MPC forecasts that a lower rate of demand growth will ease supply pressures and reducing inflation.
The decision may come as a surprise to some analysts who, despite considering this month's move difficult to anticipate, broadly expected a hold followed by a cut early in the new year.
Mortgage borrowers will no doubt welcome the move as 1.4 million homeowners face rising repayments this year as fixed-rate deals come to an end.
"However, we still need the authorities to intervene more aggressively to open wholesale funding markets," said director general of the Council of Mortgage Lenders Michael Coogan.
"There is a real need to minimise the shortfall between the demand for mortgages and lenders' capacity to supply them."
