Interest rates cut to 5.5%

The Bank of England today cut interest rates for the second time this year.

The monetary policy committee announced its decision at midday to shave 0.25% off the official cost of borrowing, which brings the figure to 5.5%.

Inflation is running well below the government's 2.5% target and the decision is thought unlikely to have any adverse affect on the economy.

But when the committee makes its decision, it weighs up the possible inflationary pressures of buoyant consumer spending and a strong housing market if the rates are eased.

The last cut - also 0.25% - was in February. Industry and unions had said that another was needed to inject confidence into the British economy to protect from the slowdown in the United States.

The Bank decided against a cut last month, noting that there were few signs the US's economic troubles had crossed the Atlantic.

However, foot and mouth is now beginning to affect the economy.

Hotels and restaurants suffered a sharp fall in sales last month, dragging growth in the services sector down to its weakest rate for six months, according to the Chartered Institute of Purchasing and Supply.

Transport companies too are reporting that the disease has put the breaks on their business.

Another cut is not expected in May. The Bank's governor, Sir Edward George, insists that decisions will not be influenced by the election but many believe it would be reluctant to act at such a politically sensitive time.

The minutes of the meeting leading up to the Bank's decision are published on its website a fortnight today.

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Useful links
Bank of England
Chartered Institute of Purchasing and Supply
Global exchange: campaign to change global economy
UK interest rates since 1985