The Bank of England’s Monetary Policy Committee reduces the official Bank Rate paid on commercial bank reserves by 0.5 percentage points to 1.5%. The previous change in Bank Rate was a reduction of 1.0 percentage points to 2.0% on 4 December 2008. Such measures are expected to moderate the impact of slowdown on UK net exports.
During 2008 United Kingdom like many other capitalized markets faced with the sharp fall in output, business and residential investment. The availability of credit to both households and businesses has tightened further, pointing to the need for further measures to increase the flow of lending to the non-financial sector.
CPI inflation fell to 4.1% in November. Inflation is expected to fall further, reflecting waning contributions from retail energy and food prices and the direct impact of the temporary reduction in Value Added Tax. Measures of inflation expectations have come down. And pay growth remains subdued. But the depreciation in sterling will boost the cost of imports.
L.D.