BOE Unanimous in Oct 8th Rate Cut

The Bank of England’s MPC voted unanimously to cut rates by 0.50% to 4.50% on October the 8th as part of the coordinated move by major central banks.

BOE Governor King briefed the committee on discussions with other major central banks and asked them whether they wished to support the action.

The Monetary Policy Committee has decided that the recent credit market turmoil has reduced the risk of increasing inflation in the English economy. “All these developments pointed to the need for a relaxation in monetary policy. In the current financial market turbulence, the reduction in Bank Rate that would ultimately be required to meet the inflation target was very difficult to gauge.”

This news comes as no real surprise to economists with BOE Governor King’s speech last night dominating headlines.

King admitted that the UK economy was probably already in recession, for the first time in 16 years.

“Not since the beginning of the First World War has our banking system been so close to collapse,” said King, frankly. Traders are already pointing to the use of the word ‘recession’ as an indication of yet more interest rate cuts to come. The market is currently anticipating another 50 basis point cut at the November meeting.

Since King’s comments and the MPC Meeting Minutes the Pound Sterling has fallen to a five-year low against the Dollar reaching 1.6134 in New York trade.