Interest rates: Scissors and stone

The banking crisis is blunting the effect of rate cuts THE Bank of England, established in 1694, has never set the official interest rate below 2%. On December 4th it tumbled to that historic floor, last seen in 1951, as the bank cut the base rate by a full percentage point, from 3% to 2%. The step had been widely expected in the City, but it still marked another extraordinary reduction in the official interest rate, which as recently as early October stood at 5%. Yet though the decision brings hope it also conveys fear. The Bank of England is doing its utmost to cushion the economy from a bumpy downturn. But the scale of its action also shows how worried it is about a pernicious recession stemming from a traumatised banking system. ... (link)