The Bank of England has cut interest rates - the first reduction in the cost of borrowing in Britain for two years. That followed a week of speculation over what it would do to shore up the UK economy.
The bank said it was necessary because growth is slowing and conditions in financial markets were getting worse, increasing pressure on companies and consumers alike.
The quarter-percentage point cut to 5.5% per cent reversed July's increase. The move follows a survey this week showing UK house prices falling sharply. The British government must be hoping cheaper mortgage payments will boost consumer spending.
In Frankfurt, the European Central Bank left interest rates on hold at 4% and a cut anytime soon seems unlikely given euro zone inflation is at a six year high.
ECB President Jean Claude Trichet told reporters: "The reappraisal of risk in financial markets is still evolving and is accompanied by continued uncertainty about the potential impact on the real economy. It is essential to meet the strong demand of our 320 million fellow citizens; it is also essential to continue anchoring inflation expectations and therefore to pave the way for sustainable and long-term growth and job creation."
Trichet focused firmly on upside inflationary risks and said some members of his policy council had even spoken up in support of a rate increase at this time. That idea pushed up the value of the euro against the dollar.
http://www.euronews.net |
