Interest Rates Drop To 5%
Posted by Nicola Mallett on
Analysts said that problems in the money markets and recent dire news on house prices drove the decision. But the credit crisis, which makes funding mortgages more expensive for banks, may mean they do not pass on the full reduction to borrowers.
However, business groups welcomed the decision and called for further cuts to shore up growth. "It is vitally important to ensure that problems in the financial sector and in the housing market do not damage wealth-creating businesses," said David Kern, economic adviser to the British Chambers of Commerce.
"Undue delay in acting threatens to reduce the effectiveness of interest rate cuts that the MPC itself has anticipated already."
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