Bank of England cuts to 3%, warns on deflation

UK interest rates have just been cut by 1.5% to 3%. They were last at this level in 1955.

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The Bank of England had been very concerned about inflation, currently at 5.2%, compared to a target of 2%. But the Bank now sees no danger from inflation in the future. Instead, it is warning that there is “a substantial risk of undershooting the inflation target”.

The Bank also noted that “since mid-September, the global banking system has experienced its most serious disruption for almost a century”. It added that “there has been a very marked deterioration in the outlook for economic activity at home and abroad”. And it expects that “the availability of credit to households and businesses is likely to remain restricted for some time”.

Earlier, the European Central Bank had also recognised that inflation was no longer a major concern, when it cut rates by 0.5% to 3.25%.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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