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Bank of England lowers rates to pre-WWII levels

Latest update : 2008-12-06

The Bank of England has brought its main interest rate down to 2% - its lowest level since 1939 - amid fears of a deep recession. Prior to the announcement, the pound sterling plunged to under 1.15 euros, its weakest since 1999.

AFP - The Bank of England said Thursday it had slashed its key lending rate by 100 basis points to 2.0 percent, the lowest level since 1939, amid mounting evidence that Britain faces a deep recession.

"In the United Kingdom, business surveys have weakened further and suggest that the downturn has gathered pace," the BoE said in a statement following its latest two-day monthly policy meeting.

"Consumer spending and business investment have stalled, while residential investment has continued to fall," it added.

The British central bank had already chopped a record 150 basis points, or 1.5 percentage points, off interest rates in November as the country faced a sharp drop in inflation and appeared set for a sharp economic slowdown.

Central banks around the world have been slashing interest rates as the impact of the global financial crisis puts the brakes on economic growth.

This week, Australia, New Zealand, Sweden and Thailand have delivered steep interest rate cuts in a bid to fight the sharp worldwide economic downturn.

The BoE rate call comes ahead of a rate decision from the European Central Bank due at 1245 GMT.

The ECB was widely forecast to lower eurozone rates by at least half a percentage point from the current level of 3.25 percent with the 15-nation economic bloc already mired in recession.

Date created : 2008-12-04