Mervyn King and the Bank of England's Monetary Policy Committee has bowed to pressure and cut the UK...
Mervyn King and the Bank of England's Monetary Policy Committee has bowed to pressure and cut the UK base repo rate to its lowest level in 48 years by shaving 0.25% to 3.5%.
A statement issued at 12pm by King - presenting his first base rate cut as Governor of the Bank of England - says the reduction was necessary because the global economic recovery is still "hesitant" and the prospect of the UK economy improving is not as good as previously anticipated.
In particular, the committee felt a further cut to 3.5% was needed to try and keep inflation "on track".
Indicators suggest the Retail Price Index inflation is above its 2.5% target at least for the short-term.
Ray Boulger, senior technical manager for mortgages at Charcol, says homeowners shopping for the best deal should be aware that there could be another rate cut before the end of the year.
"The margin between SVR and the lowest variable pay rates available is much higher today than when Base Rate was at its 1990s peak. So there is much more of an incentive to shop around for the best rate," says Boulger.
"We now appear to be moving into a sustained low inflation, low interest rate world, and Mervyn King's first move as Bank of England Governor should spur both savers and borrowers to see how they can adapt their finances to fit within it.
"The Fed may not have much more leeway, but the UK does - and with consumer spending dropping off and manufacturing crying out for a boost, at least one more cut before the year is out seems likely," he adds.
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