Volume 05 (2009, Week 05)

Another interest rate cut
The base rate set by Bank of England hits new historic low.

On this Thursday (February 5th, 2009), Bank of England cut its base rate by 0.5 percentage point to 1% on its monthly meeting of Monetary Policy Committee. This is the 5th consecutive cut since October last year, when it stood at 5%.

This cut shows how severe the UK economy condition is and how desperate the Central Bank is during this difficult period. As I argued earlier on, I don't think it is going to have any significant impact.

Many financial institutions, especially the smaller ones, opposed to the cut. But Bank of England went ahead anyway. It is very unlikely that these small institutions will pass on this 0.5% cut on their interest rate, as they're already struggling.

Meanwhile, the Reserve Bank of Australia cut its benchmark rate by a full percentage point to 3.25%, Norway's Central Bank cut its rate by a half percentage point to 2.5% and Indonesia's Central Bank cut its intreset rate by the same amount to 8.25%.