10 April 2008

BANK OF ENGLAND REDUCES BANK RATE BY 0.25 PERCENTAGE POINTS TO 5.0%

The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate

paid on commercial bank reserves by 0.25 percentage points to 5.0%.

CPI inflation rose to 2.5% in February. The Committee expects inflation to rise further this year,

reflecting the continuing impact of higher energy and food prices, as well as the recent depreciation

of sterling on import costs. Such pressures are already evident in producer input costs and pricing

intentions.

Even if commodity prices remain at their current high levels, inflation should fall back. But to

ensure that inflation meets the 2% target in the medium term, the Committee needs to balance two

risks. On the upside, above-target inflation this year could raise inflation expectations so that, in the

absence of some margin of spare capacity, inflation would remain above the target. On the

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