Another cut in interest rates

The Bank of England today resumed its downward drive on interest rates cutting the cost of borrowing by a quarter
point.

After last month's pause for breath, the Bank's nine-member Monetary Policy Committee voted to reduce its base rate from 5.5% to 5.25% - its lowest level for five years.

The decision came as a welcome relief for manufacturers and unions - who have been suffering from the high value of
the pound - as well as for homeowners.

However it means more bad news for savers who have seen their returns steadily eroded as the MPC has now wiped
2.25% off rates in the past seven months.

Despite signs that the economy is on course for the much-vaunted "soft landing", the MPC clearly concluded the fall in inflation - dropping below the Government's 2.5% target for the first time - meant they could safely return to rate
cutting without stoking price pressures.

The cut was in line with City expectations - although many analysts believe rates must now be close to bottoming out.

Kate Barker, chief economic adviser to the Confederation of British Industry, said: "Business is pleased by the Bank's decision to keep interest rates moving down which should bring some relief for the problems still being caused by the strength of sterling.

"But inflationary pressures are still weak so we believe that although today's cut is certainly useful, a half percentage point cut would have been justified."

Dr Ian Peters, deputy director general of the British Chambers of Commerce, echoed the CBI's cautious welcome:
"This cut is helpful but insufficient to put the economy firmly on track for recovery. Manufacturing industry in
particular will give a cautious welcome to this cautious cut and seek for the Bank to go further at its May meeting."

Virgin Direct has announced it will drop its mortgage rates by 0.25% for all borrowers from midnight tonight from
6.7% to 6.45% in line with the cut from the Bank of England.
It announced it will also will peg the rates for savers at 5.75% using its deposit account.

Nationwide Building Society, Abbey National and Halifax bank said they were not cutting their mortgage and
savings rates immediately.

They will be reviewing their rates and will make announcements shortly.