Rate slashed

A shock cut in interest rates this lunchtime by the Bank of England sees a fall of one-and-a-half percentage points, to just 3%.

Published:  06 November, 2008

This is the lowest interest rate since 1955. Last month the Monetary Policy Committee (MPC) cut rates from 5% to 4.5% in an effort to ward off recession. Says Richard Lambert, CBI director-general: "This is a bold and welcome move by the Monetary Policy Committee, and achieves what the CBI had been calling for."

Says Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders (SMMT): “We'd like to see a full package of support for the sector and today's cut in interest rates is a positive start. We now need to ensure these cuts are passed on to consumers and small businesses to boost confidence, ease the accessibility and affordability of credit and encourage buyers back into the showrooms. In addition, we would like to see government investigate schemes to incentivise cleaner, lower-emitting vehicles, including scrapping the planned changes to VED and mitigate the impact on manufacturing through investment in skills, training and R&D.”

The welcome rate cut follows the SMMT’s release of October’s new car registration figures, which showed a reduction of 23% on the previous month and a revised 2008 sales forecast of just 2.15 million vehicles.

Following today’s announcement the FTSE stock market gained more than 100 points, to stand down 86 points, or 1.90%, at 4444.67 by 1245 in London.

Meanwhile, the Institute of Directors said interest rates could touch record lows of 2% or less by this time next year.

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