Sterling slumped to a record low against the euro this morning ahead of the Bank of England's interest rate decision tomorrow as consumer confidence waned against a weakening housing market and a downgrade to UK growth forecasts.

The pound's decline today to 80p against the euro followed a fall in sterling to an 11-year low yesterday on a trade weighted basis, which compares the value of the pound with a basket of currencies.

Overnight, it emerged that the International Monetary Fund (IMF) will cut its growth forecasts for the UK economy to 1.6 per cent, below the British Government's 2 per cent expectation, while a Nationwide Building Society survey showed that consumer confidence in March fell to its lowest level in four years.

The decline in morale follows a surprise 2.5 per cent fall in the average UK house price that was revealed yesterday by Halifax. At the same time, the IMF said that current credit crisis could end up reaching nearly $1 trillion worth of losses.

Against the negative backdrop, the Bank of England's Monetary Policy Committee (MPC) is meeting to decide whether to cut the UK interest rate or keep it at 5.25 per cent. It is widely expected that the MPC will cut borrowing costs by a quarter percentage point to 5 per cent when it makes the announcement at 12.00pm tomorrow.

However, the MPC has to weigh up cutting the interest rate while consumer price index inflation remains above the Bank's 2 per cent target, at 2.5 per cent.

Yesterday, the Bank of England increased the amount of three-month money it is willing to auction by 50 per cent to £15 billion on fears the UK financial system was still stagnating.

After announcing the increase, which opens for bids on April 16, the London inter bank offer rate (Libor), the rate banks charge to lend to each other, fell from 5.95 per cent to 5.93 per cent. The figure moved above 6 per cent last week.

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts