UK Cuts Interest Rates, But EU Holds Steady

Subprime woes force first rate cut in Britain in over two years
By Jason Farago,  Newser Staff
Posted Dec 6, 2007 7:21 AM CST
Pedestrians walk past a display showing the FTSE 100 in London, Thursday, Dec. 6, 2007. The Bank of England cut its key interest rate by a quarter percentage point to 5.5 percent on Thursday after growing...   (Associated Press)
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(Newser) – The Bank of England cut its benchmark interest rate for the first time in over two years today, reducing the bank rate by a quarter-point to 5.5%. The cut drove the pound down to about $2.02, its lowest in 2 1/2 months. The European Central Bank in Frankfurt, however, didn't go along: it decided to keep its main interest rate unchanged at 4% despite fears of an over-strong euro.

Pressure was high on the Bank of England to cut interest rates despite the protestations of Mervyn King, the bank's embattled governor, about rising inflation. Today's cut comes after central banks in the US and Canada cut rates in an attempt to cushion the blow of the subprime mortgage collapse, buoy the housing market, and avoid a serious economic slowdown.