Bank of England cuts interest rates by 150 basis points

LONDON -- The Bank of England slashed borrowing costs on Thursday by 150 basis points to soften the blow of a sharp economic downturn.

The cut took interest rates to 3.0 percent.

Most economists polled by Reuters had forecast a half-point cut although several had changed their forecasts following a series of gloomy data. Ten out of 62 analysts predicted a full percentage point cut.

Britain's central bank has never cut interest rates by more than half a point since it was made independent in 1997. The last time rates were slashed by a percentage point was in 1993, when the country was struggling to emerge from a recession.

Pain which the year-long credit crunch has inflicted on the economy is becoming more apparent as house prices tumble and job losses mount.

Britain's economy shrank 0.5 percent in the third quarter and many experts do not expect a recovery until 2010.

Thursday's rate cut is unlikely to prevent the economy slipping into the recession but will provide a boost to consumer morale and relief to homeowners with tracker mortgages.

(Agencies)