Interest rates have been slashed by 0.5 per cent a day earlier than anticipated after a special meeting was held a by the Bank of England’s monetary policy committee (MPC).
It is part of a coordinated plan of action along with several foreign banks after financial markets “deteriorated very markedly”, the MPC stated.
The Bank worked in conjunction with the European Central Bank, US Federal Reserve, Bank of Canada, Swiss National Bank, Bank of Japan and Sveriges Riksbank to formulate the plan.
A reduction in rates was decided upon by the MPC after the supply of credit in the UK was seen to be “clearly tightening further as banks seek to adjust their balance sheets”.
However, it asserted, an interest rate cut alone is not enough to resolve the issues in the finance sector.
So the committee welcomed the government’s newly-announced programme to supply extra capital to domestic banks.
It is hoped that the extra £200 billion of liquidity being injected will provide debt help for banks across the country.
By Jamie Price