UK Cuts Interest Rates

The Bank of England is following the path laid by the U.S. Fed.

UK interest rates trimmed to 5.5%

The Bank of England has cut UK interest rates to 5.5% from 5.75% amid signs that the economy is slowing.

Expectations of a rate cut had risen in recent days after figures indicated that economic conditions had deteriorated over the past few weeks.

As is almost always the case, monetary policy choices boil down to you can try to avoid a recession or try to slow inflation. Much like the Federal Reserve Board, the Bank of England has chosen to avoid recession and will worry about inflation later.

BBC economics editor Evan Davis said that Thursday's rate cut was aimed at making sure the economy did not slow too quickly.

"It is about making sure that the slowdown, which seems to be happening, does not get out of control," he explained.

Amazingly enough for the BBC, they did not blame Bush for the UK economic slowdown in this article.

I also look for the Fed to do another 0.25% to 0.50% cut shortly.