BoE cuts rate to 0.5 per cent, Eurozone pegs it at 1.5 per cent

05 March 2009

The Bank of England today cut its key interest rates to 0.5  per cent, the lowest in its over 300 years of existence, and announced plans to ease quantitative restrictions on money supply.

Under the plan, the UK central bank will increase money supply to buy up government and corporate debt worth pounds 75 billion, in a move to kickstart the UK economy.

This is the 6th rate cut by the UK central bank since October, and with no room left to go down, BoE hopes to ease the crisis with more drastic measures like increasing the money supply.

This comes after house prices fell further in February, and new car sales dropped almost 22 per cent compared to a year ago.

The European Central Bank (ECB) also today cut interest rates in the 16-member eurozone to 1.5 per cent on the back of the worst ever economic recession in over 50 years.

''I do not exclude that interest rates could go down but we see a number of drawbacks associated with a zero rate level," Jean-Claude Trichet, ECB president, said in Frankfurt.