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Interest rate set to be slashed to 0.5%

Interest rates are likely to be slashed again this week as the Bank of England embarks on a bid to revive the economy with newly-created money.

Economists expect borrowing costs will hit a new record low of 0.5% on Thursday as rates fall for the sixth month in a row.

But a formal vote to begin so-called “Quantitative Easing” — effectively printing money — to drag the UK out of recession is also likely following the Monetary Policy Committee’s (MPC) two-day meeting.

The MPC is expected to press on with the strategy as soon as possible when Mr Darling gives the go-ahead.

While interest rates are at all-time lows, anxious banks are still reluctant to lend, so the Bank of England is resorting to increasing the money supply.

Vicky Redwood, of Capital Economics, said: “The interest rate decision is something of a sideshow this month, given that it looks set to be the first time in the MPC’s history that it takes a vote on more unconventional policy measures.”

The Bank will create the money to buy Government and corporate bonds through its Asset Purchase Facility.

The APF has bought up £820 million in corporate bonds — like company IOUs — in a bid to ease conditions in credit markets, but has so far been funded by £50 billion from the Treasury.

Belfast Telegraph

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