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27 February 2024

Britain set for new record-low rates


The Bank of England will slash British interest rates tomorrow to a fresh historic low as it attempts to fight a painful recession, according to analysts.

The British central bank cut its key lending rate in January by half a per centage point to 1.5 per cent – which was the lowest point since the BoE was established in 1694.

Tomorrow, most analysts predict the BoE's nine-member Monetary Policy Committee (MPC) will cut rates by the same amount to a fresh all-time low of one per cent at the end of a two-day meeting.

That would also mark the fourth monthly rate cut in a row as Britain battles recession amid easing inflationary pressures.

"Once again the Bank of England's MPC head into their monthly meeting under severe pressure to cut interest rates," said IHS Global Insight economist Howard Archer in London.

Investec economist Philip Shaw said his house expected "a further 50-basis-point reduction in the bank rate, taking it to a new all-time low of one per cent."

Since the BoE's January rate cut, official data showed that Britain sank into a deep recession in the second half of 2008 as the global financial crisis raged.

"With GDP suffering its largest drop for nearly 30 years in the fourth quarter of 2008. Credit conditions remaining extremely tight and a period of deflation highly possible in the second half of this year, the pressure on the Bank of England to act is intense," Archer said.