BOE To Cut Interest rates?

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Yellow Belt
We should know the answer to this very shortly-

The Bank of England looks set to cut already record low interest rates by at least another half percentage point on Thursday, aiming to help the British economy out of recession by getting consumers and companies to spend again.

Most analysts polled by Reuters last week predicted the central bank would cut rates to 1.0 percent from 1.5 percent. Some predicted a bigger reduction when it announces the decision at noon GMT, and said it would not be long before the BoE raised the money supply to boost demand.

Interest rates have fallen sharply around the globe as an 18-month-old credit crunch has brought the world economy to its knees, putting millions out of work and thousands of companies out of business.

The Federal Reserve has already cut U.S. rates to a record low of between zero and 0.25 percent. In Japan, they stand at just 0.1 percent. The European Central Bank is expected to keep euro zone rates at 2.0 percent later on Thursday but then cut them to a record low next month.

The International Monetary Fund has predicted the British economy could be the worst-hit in the industrialised world, shrinking 2.8 percent in 2009.

"The (UK) economy is in deep recession and (we) believe that interest rates should fall further -- possibly to zero," said Andy Goodwin, senior economic adviser to the Ernst and Young ITEM Club.



Yellow Belt
The Bank of England has reduced interest rates to a record low of 1% from 1.5% in an attempt to boost the shrinking economy.

This marks the fifth interest rate cut since October, as the Bank seeks to encourage more lending.

The decision comes after official data showed the UK had entered a recession in December, after two successive quarters of economic contraction.

But some business groups argue rate cuts will not ease the economic crisis.

Following the rate cut Paul Broadhead of the Building Societies Association (BSA) told the BBC that savers were being "punished", arguing that the move could hinder the funds available to societies to lend as mortgages.

The Bank Rate has now been reduced from 5% in October last year.

The Federation of Small Businesses (FSB) was one of the business groups that had favoured keeping rates on hold, arguing that what was needed was improved access to capital.

It said that a survey of its members found that 63% wanted rates to remain at their current level, compared with only 24% who wanted a further cut.

"These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required," said FSB national chairman John Wright.

Among the mortgage lenders, Halifax said it would pass on the rate cut to customers with standard variable rate mortgages.



Yellow Belt
They interviewed a guy on the news earlier. Before Ocober his mortgage was almost £1,000 per month. Now it's down to just over £200 a month. That's a huge drop in outgoings.
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