Bank of England cuts interest rate

The Bank of England yesterday cut the benchmark interest rate to the lowest since the bank was founded in 1694 to help drag the British economy out of the deepening recession.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, reduced the bank rate to 1 percent from 1.5 percent. The decision matched the median estimate of 61 economists of a Bloomberg News survey.

The UK economy will shrink the most since 1946 this year and faster than any other industrialized country, International Monetary Fund forecasts show. Prime Minister Gordon Brown's government has given the central bank powers to spend up to 50 billion pounds on bonds and commercial paper as interest rates lose their potency to aid economic growth.