MercoPress. South Atlantic News Agency

PM Brown tells banks lower rates must benefit consumers

The Bank of England seen from Threadneedle Street

The Bank of England slashed interest rates to a 53-year low in a dramatic attempt to rescue the UK economy from deep recession. The 1.5 percentage points cut by the Bank's Monetary Policy Committee (MPC) on Thursday is the biggest single move since March 1981 and brings rates to levels not seen since 1955.

Experts predicted they could reach an all-time low of 1.5% by mid-2009 as the Bank of England acts to stave off the worst impact of an economic slump. Chief Secretary to the Treasury Yvette Cooper said ministers expect banks to pass on the cuts as rapidly as possible after shoring up the finances of several major players with taxpayers' cash. "The Government has stepped in to make the banking system safe, to support the banks. It is right now that the banks do their bit to support everybody else," she said. The Bank of England made the move because of the "substantial risk" of undershooting its 2% inflation target as a sharp recession looms in the wake of September's banking turmoil. "There has been a very marked deterioration in the outlook for economic activity at home and abroad," it said. Asked whether banks should pass the rate cut on to customers, Prime Minister Gordon Brown's spokesman said: "We are not going to make specific comments about the specific pricing of individual mortgage products in every single bank. But we are clear that consumers should see the benefit of reduced interest rates. "The Prime Minister supports the view that banks should pass on the cut. I think the public expects that when there is an interest rate cut of this magnitude, then they should see the benefit. The deep cuts come despite the official measure of inflation standing at 5.2% - more than double the MPC official 2% target - underlining how much the worries over an economic slump have grown.