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Bank cuts rates to 3%

Interest rates have been set to three per cent by the Bank of England, a cut of 1.5 per cent and the lowest base rate since 1955.The cut itself is also the biggest since a two per cent decrease in March 1981 and comes just after a 0.5 per cent cut in October took the rate to 4.5 per cent.A "significant reduction" in the rate was necessary to meet the two per cent target for CPI inflation, the Bank's Monetary Policy Committee said.The Confederation of British Industry praised the announcement, with its director general calling it a "bold and welcome move".Richard Lambert said: "Business and consumer confidence has been deteriorating sharply in recent months, and recession has replaced inflation as the major threat to the economy over the next year or two."This cut of one and a half percentage points should help to ease conditions in the credit markets, and allow banks to pass the benefits on to their customers."

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