UK reduces interest rates to 1%

Friday, 6 February 2009

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.

However, there are concerns that savers will be hurt by lower interest rates.

And business groups argue that this rate reduction will not be enough to ease the economic crisis, and will not encourage banks to lend.

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

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

In a statement, the Bank of England said that the rate cuts, along with government measures to boost the economy, "would provide a considerable stimulus to activity as the year progressed."

Source: News.bbc.co.uk