News

The Bank of England has slashed interest rates by 1.5% to 3% - the biggest cut since it gained independence in 1997 - following a torrent of negative economic data reflecting the worsening of the UK economy.

The surprise move exceeds calls for a 1% cut from the Federation of Small Businesses (FSB) and other leading industry bodies. The CBI, Ernst and Young’s ITEM Club and the Institute of Directors had also called for a 1% cut.

The cut brings the interest rate down to its lowest level since the 1950s.

The Monetary Policy Committee (MPC) cut rates by 0.5% last month in a bid to stave off recession.

The cut follows news that output in the manufacturing sector fell by 0.8% last month continuing the longest continual decline in output since 1980.

In a statement, the MPC said: "The past two months have seen a substantial downward shift in the prospects for inflation in the United Kingdom.

"There has been a very marked deterioration in the outlook for economic activity at home and abroad. Moreover, commodity prices have fallen sharply."

It added: "Inflation should consequently soon drop back sharply, as the contribution from retail energy and food prices declines, notwithstanding the fall in sterling."

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