The Bank of England made a shock 1.5 per cent cut in interest rates today to just 3 per cent, the lowest level in more than half a century, as it seeks to prevent Britain from sliding into a deep recession.
That was the biggest official interest rate cut since the 1981 slump and completely wrong-footed analysts who had mostly been predicting a half-point reduction. Not one in 62 polled by Reuters had expected such a massive move.
The BoE said the economic outlook had got a lot worse and drastic action was now needed. Economists said more rate cuts would still follow and it was possible Britain could soon have rates the same level as in the United States - one per cent.
"The MPC needs to keep cutting interest rates aggressively. I think that they will need to fall to one per cent," said Roger Bootle, economic adviser to Deloitte.
"Rates have never before been this low, but extraordinary times require extraordinary action. And it is not impossible to imagine circumstances under which rates end up having to go lower, perhaps even to zero as they have done in Japan."
Two-year bond yields fell to a record low below 2.5 per cent. The pound, already down about 20 per cent this year, fell but then rose after the rate verdict as investors bet the economy's growth prospects had improved.
The British economy shrank for the first time in 16 years in the third quarter and most economists expect further contraction through next year and only a small recovery in 2010, when Gordon Brown, the British prime minister, must call an election.
The Swiss National Bank and European Central Bank also cut interest rates today as countries all around the globe try and cope.
*Reuters
Slow loris biog
From: Lonely Loris is a Sunda slow loris, one of nine species of the animal native to Indonesia, Malaysia, Thailand and Singapore
Status: Critically endangered, and listed as vulnerable on the International Union for Conservation of Nature red list due to growing demand in the global exotic pet trade. It is one of the most popular primate species found at Indonesian pet markets
Likes: Sleeping, which they do for up to 18 hours a day. When they are awake, they like to eat fruit, insects, small birds and reptiles and some types of vegetation
Dislikes: Sunlight. Being a nocturnal animal, the slow loris wakes around sunset and is active throughout the night
Superpowers: His dangerous elbows. The slow loris’s doe eyes may make it look cute, but it is also deadly. The only known venomous primate, it hisses and clasps its paws and can produce a venom from its elbow that can cause anaphylactic shock and even death in humans
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
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Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.