Base rate down to two per cent

Barry Naisbitt, Chief Economist at Abbey said: "There cannot be many people who thought even six months ago that the Monetary Policy Committee (MPC) would cut rates to their lowest level since the Second World War before the end of 2008.  But today’s decision of a further 1.00% Bank Rate reduction does that.
 
"These are clearly extraordinary measures, reflecting the deteriorating economic situation in the UK and also globally. The November meeting minutes hinted at this reduction and so markets will be keenly awaiting the minutes of this meeting to see if the MPC is considering even more dramatic action in the months ahead.  The cut should help to bolster consumer and business confidence at a time of heightened economic uncertainty".
 
But some believe more needed to be done. Ray Boulger of John Charcol, the UK’s leading independent mortgage adviser, commented, "Last month’s Quarterly Inflation Report highlighted a sea change in inflation expectations and all the subsequent statistics show the economic situation continuing to deteriorate rapidly. 
 
"These factors all supported the need for another substantial Bank Rate cut and, having recognised that, the MPC clearly saw that the sooner the cut was made, the quicker its impact will be felt.
 
"A key factor deterring the MPC from cutting Bank Rate by more than 1.5% last month was uncertainty over the impact of the Pre-Budget Report and in particular the scale of the anticipated tax cuts.