The Bank of England's Monetary Policy Committee has cut the base rate by 150 points to 3% - by far the biggest cut in the MPC's 11-year history.
While consumer price inflation was 5.2% in September – more than double the 2% target – the Bank said in a statement accompanying the cut that there was now a significant likelihood of an undershoot on inflation because of the sharp slowdown in the global economy.
Ian Kernohan, economist at Royal London Asset Management, commented: “With recent economic data so poor, the market was already expecting a big move from the MPC but a cut of this size shows we’ve entered uncharted territory. Small cuts are not appropriate when the economy is slowing so fast and the MPC was right to be bold.”
The market had certainly expected a cut but consensus was for a maximum of 100 basis points. The rate is now at its lowest point for more than 50 years.
The European Central Bank, which announces its policy decision at 1pm GMT today, is also widely expected to cut.
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