10 May 2001
Bank cuts rates yet again

By FWi staff

BORROWING costs have fallen again following todays decision by the Bank of England to trim interest rates by 0.25%.

The means the base rate now stands at 5.25%, a 30-year low, compared with 6% at the start of 2001.

The Banks monetary policy committee will be hoping that the cut will stimulate economic growth and nudge inflation back into the comfort zone.

UK output growth in the first quarter of the year was slower than expected, causing some weakening in business confidence.

Although earnings growth has risen, the Bank says this was the result of “temporary factors” and settlements remain broadly stable.

Underlying inflation, which excluded mortgage repayments, has been running below the governments target of 2.5% for the past two years; last month it was at 1.9%.

The slowing world economy has not helped. “The extent and duration of the slowdown remain uncertain,” said the Bank in a statement.

This has put pressure on interest rates, especially in the US which cut rates last month, the fourth time it has done so this year.

This latest UK cut will save farmers the equivalent of about 25 million a year in interest repayments. But the significant proportion with cash still in the bank face the lowest interest rate on savings for 30 years.

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