Reaction to Bank of England’s UK Interest Rate Cut

Commenting on the decision by the Bank of England to cut UK interest rates to 1%, Barbara-Ann King, head of proposition at Barclays Stockbrokers, said: “This latest rate cut is certainly another step towards stimulating our economy. Improving confidence in the markets and aiding economic recovery which is crucial in today’s climate.”

King continued: “We recently found almost half of our investors (48%) are confident of market recovery, believing the FTSE will begin to recover in the next six months; an encouraging reaction in light of the volatility that has dominated financial markets throughout the past year.”

Henk Potts, equity strategist at Barclays Stockbrokers said: “This cut comes as no surprise – we anticipated the Monetary Policy Committee would cut rates by 50bp to 1.0% this week. The UK economy contracted by 1.5% in Q4 2008 – its weakest performance since 1980. The threat of inflation has now turned to the risk of deflation due to the sharp drop in commodity prices, the temporary cut in VAT and weakness in consumer demand. We now expect the Bank of England to cut rates close to zero by mid-year.”


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