The Bank of England cut interest rates on Thursday for the first time in more than two years in response to a sharply slowing economy at home, while the European Central Bank left rates steady in the euro zone.
The 0.25 percentage point cut in UK rates, to 4.5 percent, followed wooden consumer spending that has weighed on growth this year, economists said. During the second quarter, the UK's economy grew at its slowest annual rate in 12 years.
In a statement explaining its decision, the Bank of England said growth in the first half of this year was "subdued." The decision was made by the bank's monetary policy committee at its monthly meeting.
"Household spending and business investment growth have slowed," it said. "Although there are some signs of a pickup in consumer spending, downside risks remain in the near term."
The cut was widely expected after the committee's vote last month was 5-4 to keep rates unchanged.
The bank increased interest rates five times from November 2003 to last August, in part to slow what was then a fast rise in real-estate prices and buoyant consumer spending.
Since then, however, the UK housing market has slowed, spending has dropped off and manufacturing has failed to emerge from a prolonged slump.
"Overall, the picture for the consumer in the UK does remain quite weak," said Michael Penn, an economist at Merrill Lynch in London.
Although the bank warned that higher oil prices could raise inflation near term, some economists said the bank would nonetheless loosen monetary policy further.
"We could see another rate cut before the end of the year," said Audrey Childe-Freeman, an economist at CIBC World Markets in London.
The bank will probably revise its growth forecasts downward when it publishes its quarterly report next week, she said.
In the 12-nation region that uses the euro, the European Central Bank, as expected, left its benchmark rate at 2 percent, where it has stood since June 2003.
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