Interest rates cut by 1.5%

Many falling sterling notes The MPC hopes the rate cut will help stimulate the economy

Interest rates were cut by 1.5% as the Bank of England took bold action to try and inject more confidence into the ailing UK economy.

The cut takes UK interest rates to 3%, their lowest level since May 1954 and follows a wave of cuts across the world as the Monetary Policy Committee (MPC) comes under pressure to halt Britain's slide into a deep recession.

Martyn Pellew, vice-president of the North East Chamber of Commerce (NECC), said: "We are delighted that the MPC has followed the lead taken by the US in making a bold cut to rates today. The North East has many exciting large-scale investment projects in the pipeline, in particular in the processing and ports sector and today's cut will help ensure that these come to fruition.

"We need to restore confidence to the banking sector, the business community and to the public to get money moving around the system. This significant cut should serve as a catalyst to boost confidence and help us ensure a faster recovery."

Liz Mayes, Assistant Regional Director, CBI North East, said: "This is a bold and welcome move by the Monetary Policy Committee, and achieves what the CBI had been calling for. Business and consumer confidence has been deteriorating sharply in recent months, and recession has replaced inflation as the major threat to the economy over the next year or two. This cut of one and a half percentage points should help to ease conditions in the credit markets, and allow banks to pass the benefits on to their customers."

The Newcastle Building Society agreed with the comments on the benfits for the economy, but warned that the cut might not help everyone. Steven Marks, lending executive at Newcastle Building Society, said: "The question for the MPC this month was not whether to cut interest rates, but by how much, and it is good news that the rate has been reduced by 1.5% to try to support the economy."We are obviously now entering a recession, and there are also worrying signs on unemployment. It is therefore likely that there will be further rate cuts to follow this one, which will provide some relief to borrowers, although savers will obviously see lower returns."

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