UK Lowers Rates to Record Low

123jump.com Staff
08 Jan, 2009
New York City

The Bank of England lowered its benchmark interest rate to 1.5%, the lowest level since inception in 1964. The central bank hinted worsening economic conditions, falling retail sales and further weakeness in the economy. Crude oil prices declined below $42 a barrel.

[R]1:00PM New York, 6:00PM London - The Bank of England cuts rates to a record low to 1.5%. Nissan plans cut 1,200 U.K. jobs from its Sunderland plant.[/R]

The benchmark stock index in London fell marginally after the Bank of England aggressively lowered its benchmark interest rate to the lowest since its launch in 1694. Crude oil prices fell 70 cents to $41.8 per barrel.

In London trading FTSE 100 index declined 0.1% or 2.14 to 4,505.37.

Of the FTSE 100 index stocks 41 increased, 55 declined, and 6 were unchanged. Admiral Group led gainers in the index shares with a rise of 9.3% followed by Autonomy Corp gaining 7.2%.

Bank of England Cuts Rates to Record 1.5%

The Bank of England elected to lower the rate paid on commercial bank reserves by 0.5 percentage points to a record 1.5%, the lowest in its 314 year history.

The central bank’s aggressive decision was made in the wake of “a significant risk of undershooting the 2% CPI inflation target in the medium term at the existing level of the Bank Rate.”

Monetary authorities say conditions continue to worsen and the global markets and the pace of contraction in activity heightened in the last three months of 2008.

Output is forecasted to fall steeply in during the first part of the year.

The BoE noted that surveys of retailers and reports from the Bank’s regional Agents indicate that consumer spending continues to decline.

“At its January meeting, the Committee noted that the recent easing in monetary and fiscal policy, the substantial fall in sterling and the prospective decline in inflation would together provide a considerable stimulus to activity as the year progressed,” said the central bank in a statement.

Minutes of the meeting will be published on Wednesday January 21, 2009.

Nissan to Cut 1,200 U.K. Jobs

Nissan announced today that it plans to slash 1,200 manufacturing jobs out of the 3,800 production at its Sunderland plant in the U.K.

The plant exports 80% of its output to more than 45 countries.

Nissan hopes that most of the job losses will be voluntary. There will however be a 90-day consultation period.

The company’s senior vice-president for manufacturing in Europe, Trevor Mann said, “Like all manufacturers, the Sunderland plant is currently operating in extraordinary circumstances not of our making. It is essential we take the right action now to ensure we are in a strong and viable position once business conditions return to normal.”

Gainers & Losers

Admiral Group led gainers in the FTSE 100 index shares with a rise of 9.3% followed by gains in Autonomy Corp. of 7.2%, in Tullow Oil of 5.3%, in International Power of 4.6%, and Aviva Plc of 4.5%.

Prudential Plc led decliners in the FTSE 100 index shares with a loss of 7.5% followed by losses in Standard Chartered of 6.5%, in Vedanta Resources of 6%, in Anglo America of 5.9%, and Cairn Energy of 4.9%.

Commodity stocks fell after copper for delivery in three months dropped 4.5% to $3,191 a ton. Rio Tinto tumbled 4.5%, BHP Billiton fell 3.2% and Xstrata slipped 3.1%.

Europe Markets Review

In London FTSE 100 Index closed lower 2.14 or 0.05% to 4,505.37, in Paris CAC 40 Index decreased 21.76 or 0.65% to close at 3,324.33 and in Frankfurt DAX index lower 57.56 or 1.17% to close at 4,879.91. In Zurich trading SMI decreased 10.62 or 0.18% to close at 5,751.07.