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Bank of England cuts rates

The UK central bank trimmed interest rates by 0.25 per cent today.

This is the third such reduction from the Bank of England since the beginning of the credit crunch last summer, and means that the base rate now stands at five per cent.

Concerns over liquidity in the money markets were cited by the Bank as a major factor behind the decision.

"Credit conditions have tightened and the availability of credit appears to be worsening," it said in a statement.

"The disruption in financial markets could lead to a slowdown in the economy that was sufficiently sharp to pull inflation below target."

Commenting, Andrew Smith at KPMG told Reuters that he was sceptical that the national economy would be stimulated by the move.

"The medicine may not get through to the patient," he said.

"With the impact of monetary policy now blunted, rates will ultimately have to fall further to achieve the same result."