Debt news: Bank of England explains base rate cut

20 November 2008

The Bank of England has published the minutes of the meeting which led to the 1.5% base rate cut, giving people in debt reason to expect further cuts ahead.

The minutes of the BoE’s Monetary Policy Committee (MPC) meeting show the thinking behind the unexpectedly large cut and – most important for people with debt payments to make – provide a few hints about future cuts.

Regarding November’s 1.5% cut, they explain that the problems affecting the banking sector ‘had probably reduced the impact of reductions in Bank Rate on activity. This reinforced the need for a substantial reduction in Bank Rate’.

Looking to future decisions, the minutes state that some members thought ‘there was an argument for leaving some of the required policy loosening to the months ahead to support confidence as the economy weakened’.

“The MPC are clearly very much aware of the need to reduce the cost of borrowing further,” said a spokesperson for debt management company Gregory Pennington. “However, they’re keen to spread that reduction over some time, rather than delivering one massive cut all in one go.

“In the months to come, they’ll be keeping a close eye on how things are going so they can deliver the cuts that the economy needs as things change. It’s an important subject for all kinds of people and organisations, from people in debt to companies – and the whole banking industry, of course.”

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