The Bank of England has cut interest rates once again to help to encourage the economy to recover. The cut of 0.00% is seen as a way of cutting the base rate without it going down to zero and punishing lenders.
All previous cuts to the interest rate have been by actual amounts of 0.25% or greater, and this 0.00% cut is seen as a bit of a departure from the norm. However, it was welcomed by the Chancellor of the Exchequer, Alistair Darling, who said "Any cut in interest rates at this time is a boon to the economy, and should be seen by the public as an incentive to recovery."
In detailed information from the Bank of England it emerged that the original base rate cut figure had in fact been greater than 0.00%. The planned cut was in fact 0.0032%, but it was then rounded to the correct number of decimal places.
The Bank of England has warned that if, as a result of the move the economy begins to strengthen, then inflation could become an issue. They said that if this was the case, the 0.00% cut may need to be reversed. Governor Mervyn King said even this may not be enough. "If reversing the cut doesn't halt inflation it may even be necessary to double this figure."
