The decision by the MPC to reduce the official cost of borrowing from 6 per cent to 5.75 per cent brought to an end 12 months of interest rate stability. The Bank of England had been under increasing pressure to act since last month's two aggressive half-point rate cuts by the US Federal Reserve to try to revive the flagging American economy. Heartfelt relief Industry and unions argued that rates had to come down on this side of the Atlantic in order to bolster confidence and prevent the US slowdown spreading to the British economy. Firms are finding the economic tea-leaves harder than usual to read. Companies needed this cut to bolster their confidence and to sustain investment, which is vital to the UK's long-term future.
Low inflation gives room for a cut now without damaging stability.
At last there is light at the end of the tunnel - it is up to the MPC to ensure it is not the light of an onrushing train. Mortgage companies are divided over whether the housing market has peaked or is still on an upward curve. According to the January survey by Nationwide, Britain's largest building society, house prices rose 11.2 per cent over the past year. This would give a home worth 75,000 in January 2000 a value of 83,383 a year later. But the Halifax, the UK's largest mortgage lender, released a rival survey last week which showed prices falling.