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Interest rates cut to 5.25%

The Bank of England has cut interest rates by 0.25% to 5.25%, giving retailers a boost after poor Christmas sales and fears of an economic downturn this year.

A statement from the Bank of England's Monetary Policy Committee said the interest rate cut was necessary to meet the 2% target for CPI inflation in the medium term.

It said: "The prospects for output growth abroad have deteriorated and the disruption to global financial markets has continued. In the UK, credit conditions for households and businesses are tightening. Consumer spending growth appears to have eased. Although the substantial fall in the sterling exchange rate is likely to promote re-balancing of total demand, output growth has moderated to around its historical average rate and business surveys suggest that further slowing in prospect. These developments pose downside risks to the outlook for inflation."

The Bank of England cut interest rates from 5.75% to 5.5% at the end of last year, giving some relief to businesses.

However, the decision to make a further cut was rejected last month, despite retailers calling for a further cut after poor Christmas sales figures.

The cut today will relieve some pressure on businesses who fear that increased mortgage costs and concerns over the economy will keep shoppers away from stores.

Readers' comments (1)

  • I am not sure that this interest rate cut will mean too much more spending power really for the average person. A little bit more would have been nice to make this a bit sweeter and give people a bit more cash to spend in the high street.

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