Central banks cut interest rates - 8th October 2008

The Bank of England joined other world central banks today in a co-ordinated cut in interest rates designed to ward off the threat of global recession.

The Bank of England, the US Federal Reserve, and the European Central Bank all cut their main lending rates by 0.5 per cent, in the first unscheduled rate moves since the aftermath of 9/11. Sweden, Canada and Switzerland made similar cuts and Australia reduced rates by a whole percentage point earlier this week.

Threadneedle Street cut its bank rate to 4.5 per cent, the Fed to 1.5 per cent and the ECB to 3.75 per cent. It marks the biggest cut by the Bank of England since November 2001 and takes rates to their lowest for two years.

This unprecedented move has come after increasing calls for a co-ordinated global action to resolve current market turmoil and to increase lending. And it came just hours after the UK government unveiled plans for a £50bn recue plan for UK banks. 

In the UK, some mortgage lenders immediately passed on the rate cut to borrowers trimming their variable rates.

The Monetary Policy Committee said that cuts in interest rates alone "could not be expected to resolve the current problems in financial markets" and that they welcomed the government's plan to recapitalise the major UK banks.

Conti Financial Services says that it’s too early to comment on the specific implications of this move for those thinking of buying, or who already own, property abroad. It does, however, welcome this bold response to the current crisis and believes it’s a positive step towards the process of rebuilding confidence.