Bank of England expected to slash interest rates

The Bank of England was set to make history today by slashing interest rates to an all-time low to battle a deepening recession.

Rate-setters on its Monetary Policy Committee (MPC) are virtually certain to slash borrowing costs below 2% for the first time since the Bank was founded in 1694.

The anticipated move comes hard on the heels of drastic rate cuts from 5% to 2% since the beginning of October as the UK’s economic plight worsens.

Rates could fall to as low as 1% when the MPC’s decision is announced at noon, some experts have predicted.

The MPC will weigh up a raft of gloomy economic data including a 15.9% fall in house prices during 2008, as reported this week by building society Nationwide.

Despite hopes of a boost from a weaker pound, survey data from the UK’s manufacturing and services sectors show activity levels close to record lows.

Meanwhile, retailing casualties such as Woolworths and Zavvi have mounted on the UK high street as shoppers cut back. Updates from the likes of Marks & Spencer, Next and Debenhams have been better than feared but they still reported declining sales as consumer confidence slumps.

And the Bank’s latest credit conditions survey warns lending to households and businesses is set to fall further during the first three months of this year - leading to more house price falls, corporate failures, and job losses.