Bank of England cuts base to 1%

Date: 6th February 2009

The Bank of England has cut its base rate from 1.5 per cent to one per cent in a bid to kick-start the economy.

Yesterday (February 5th), the Bank's monetary policy committee (MPC) opted to make the half a percentage point cut - bringing the lending rate to a new historical low.

But the financial spokesman for the Liberal Democrats, Vincent Cable, believes that continuously reducing interest rates is perhaps not the answer to the economic crisis.

He said: "The Bank of England has to do what it can to reduce the cost of credit in the face of deepening recession.

"However, there is now only very limited scope for cutting interest rates, but there is no alternative but to go down that route."

He added that the "real issue" for many businesses - including ltd companies and business start-ups - and individuals was the availability of lending, rather than the cost of it.

Earlier this week, the Federation of Small Businesses had urged the MPC to hold rates as they were and instead encourage lenders to loosen credit.