Bank Of England Issues Massive Rate Cut
November 6, 2008 by Tisa Silver
Filed under Finance
The Bank of England cut a key interest rate by a larger than anticipated 150 basis points! Central banks across Western Europe followed the move, but much more conservatively.
The European Central Bank (ECB) and the Swiss National Bank issued cuts of 50 basis points.
BOE’s move was by far the most aggressive and for good reason.
The country’s home sales were 52 percent lower in September 2008 than the same month last year (Associated Press). In October, consumer confidence fell to the lowest level since 1974. According to Global Insight, consumer spending accounts for 65 percent of the country’s gross domestic product (GDP). Which for the third quarter, posted a worse than expected 0.5 percent decline.
The cuts lifted stocks from session lows, but the markets saw a regional decline. The FTSE 100 lost 3 percent, take a look at today’s chart.
Rate cuts are used to decrease the cost of lending, but unfortunately they can’t restore trust!
