Interest rate cut garners mixed reaction

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Interest rate cut garners mixed reaction

The Bank of England's cut in the base rate of interest has received a mixed reaction from the UK's financial institutions.

Abbey's chief economist Barry Naisbitt said that the bank's decision to reduce the base rate by 0.5 per cent, which takes it to its lowest ever level, is "extraordinary", but could help the deteriorating economic situation in the UK by freeing up the flow of credit.

He added: "The cut should help to bolster consumer and business confidence at what is a clearly a very difficult time in the economy".

However Legal & General, a pensions and insurance provider, argued that the cut may be "counter-productive".

The company added: "What lenders need more than ever are savers' deposits, and they are not going to get them if they can only offer paltry rates of interest."

Recent research by Alliance & Leicester indicated that Brits are continuing to save despite the low rates of interest and that many people view saving as the best way to help them through the credit crunch.

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