UK reduces interest rates to 1%

Published 05th Feb 2009

The Bank of England has reduced interest rates to a record low of 1% from 1.5% in an attempt to boost the slowing economy, as widely expected.

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 quarters of shrinking economic growth.

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

Following the rate cute Paul Broadhead of the Building Societies Association (BSA) told the BBC "savers are being punished" and the move could hinder the funds available to societies to lend as mortgages.

Base rates have now come down from 5% in October.

The Federation of Small Businesses (FSB) was one of the business groups that had favoured rates to be kept on hold.

It argued 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.

Source: ' BBC '

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