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Rate cut expected for Bank of England

Marketplace Staff Mar 5, 2009
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Rate cut expected for Bank of England

Marketplace Staff Mar 5, 2009
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TEXT OF STORY

Steve Chiotakis: With the economic fallout touching most of the planet, there is
on-going pressure to keep cutting interest rates to entice more borrowing. The Bank of England’s rate is already at centuries-old lows. And the European Central Bank has been on a trim fest of late as well. Both this morning are scheduled to announce decisions on whether to keep the cuts coming. If they do cut some more, it’ll continue the remarkable speed at which they’re doing it. In Britain, rates are down from 5 percent back in October to the current 1 percent. From London, Christopher Werth has more.


Christopher Werth: Economists are expecting the Bank of England to cut its interest rate by a half of a percent today, giving the Bank very little room to manoeuvre its monetary policy. That means the Bank will likely also announce its intention to initiate a more unconventional approach known as quantitative easing.

There¹s been a lot of talk about quantitative easing lately. The idea would be to allow the Bank of England to essentially create money by buying assets from banks. And the hope is to get that money flowing into the economy through lending.

The European Central Bank has been much more cautious on this point. The ECB is hoping to avoid the political difficulties quantitative easing brings in choosing which countries to buy assets in. The European Central Bank is also expected to cut its interest rate a half of a percent today.

In London, I¹m Christopher Werth for Marketplace.

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