Highlights
The Bank of England lowered its key interest rate by 25 basis points to 5.5 percent this morning. Its rate remains the highest among G7 countries. Although third quarter growth was robust, recent data have indicated that the economy may be slowing faster than anticipated as a combination of past rate increases take hold and the global credit crunch shows signs of impacting key sectors of the economy. In cutting its rate, the monetary policy committee decided the risks of slowing economic activity outweighed those of increasing inflationary pressures. The Bank has an inflation target of 2 percent and consumer price inflation was above that level in October. Most analysts thought the MPC would wait for firmer evidence of a slowdown, but recent survey data indicated that the important service sector was softening and house prices were declining. By cutting rates, the MPC is trying to preempt a sharp slowdown in output growth rather than focusing higher oil and fuel prices.

In its statement, the Bank said
"The Bank of England's Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.5%.

"Although output in the United Kingdom has expanded at a brisk pace for the past two years, there are now signs that growth has begun to slow. Forward-looking surveys of households and businesses suggest spending is moderating, broadly in line with the projections contained in the November Inflation Report. But conditions in financial markets have deteriorated and a tightening in the supply of credit to households and businesses is in train, posing downside risks to the outlook for both output and inflation further ahead.

"CPI inflation was 2.1% in October. Higher energy and food prices are expected to keep inflation above the target in the short term. Although upside risks to inflation remain, which the Committee will continue to monitor carefully, slowing demand growth should ease the pressures on supply capacity, bringing inflation back to target in the medium term.

"Against that background, the Committee judged that a decrease in Bank Rate of 0.25 percentage points to 5.5% was necessary to meet the 2% target for CPI inflation in the medium term."

2007 Release Schedule

Released On: 1/11 2/8 3/8 4/5 5/10 6/7 7/5 8/2 9/6 10/4 11/8 12/6 Released For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov