The Bank of England’s Monetary Policy Committee has today voted to cut the official Bank Rate paid on commercial bank reserves from 4.5% to 3%.

Although inflation is higher than the set target, most economists think that the loominrecession will curb any inflationary pressure in the United Kingdom. A lack of economic activity at home and abroad means commodity prices have fallen sharply.

Disruption in the the global banking system and problems with funding and liquidity in several countries, including th UK, have seen a number of measures put in place to ease the situation. It is expected that the availability of credit to households and to businesses is likely to remain restricted for some time. As a consequence, money and credit conditions have tightened sharply.

The comittees cut was unexpected, most analaysts predicted a reduction of 0.5%-1.0%.

The cut has also been welcomed by the CBI. Ministers have been pressurising banks and building societies to pass te full cut onto customers.

The Committee’s latest inflation and output projections will appear in the Inflation Report to be published on Wednesday 12 November.

The minutes of the meeting will be published at 9.30am on Wednesday 19 November.