The Bank of England (BoE) will on Thursday slash British interest rates to a fresh historic low as it attempts to fight a painful recession, according to analysts.
The British central bank cut its key lending rate in January by half a percentage point to 1.5 per cent -- which was the lowest point since the BoE was established in 1694.
On Thursday, most analysts predict the BoE's nine-member Monetary Policy Committee (MPC) will cut rates by the same amount to a fresh all-time low of 1.0 per cent at the end of a two-day meeting.
That would also mark the fourth monthly rate cut in a row as Britain battles recession amid easing inflationary pressures.
"Once again the Bank of England's MPC head into their monthly meeting under severe pressure to cut interest rates," said IHS Global Insight economist Howard Archer in London.
Investec economist Philip Shaw said his house expected "a further 50-basis-point reduction in the bank rate, taking it to a new all-time low of 1.0 per cent."
Since the BoE's January rate cut, official data showed that Britain sank into a deep recession in the second half of 2008 as the global financial crisis raged.
Meanwhile, the European Central Bank was expected Thursday to hold borrowing costs at 2.0 per cent, after slashing them at a record pace since October to combat recession in the eurozone.
The US Federal Reserve and the Bank of Japan have already lowered their main interest rates to virtually zero as they seek to recover from the global credit crunch.
Britain is mired in recession for the first time since 1991 after gross domestic product shrank by 1.5 per cent in the fourth quarter of 2008 after a contraction of 0.6 per cent in the third.
The fourth quarter figure was also the biggest fall in GDP since 1980.
"With GDP suffering its largest drop for nearly 30 years in the fourth quarter of 2008 ... credit conditions remaining extremely tight and a period of deflation highly possible in the second half of this year, the pressure on the Bank of England to act is intense," Archer said.
He noted that the latest economic data reinforced the belief that "the economy is poised to suffer in 2009 the largest single year contraction since the Second World War."
Last week, the Fed froze US interest rates at zero to 0.25 per cent and also pledged to use "all available tools" to lift the country's battered economy out of a deep recession.
The BoE is meanwhile considering increasing money supply to ensure growth does not slow so much that inflation falls below target.
Bank governor Mervyn King said last month that the central bank was considering the "unconventional measures" that the British government placed at its disposal as part of a new package.
The government has said it will allow the BoE to purchase private sector assets worth up to 50 billion pounds (55 billion euros, 71 billion dollars), effectively pumping money directly into the system in an effort to kickstart lending in the economy.
The new scheme provides BoE policymakers with another tool in a bid to combat the possibility of deflation -- or a prolonged period of falling prices.
Figures published last month showed 12-month inflation sank to 3.1 per cent in December from 4.1 per cent in November, and there are fears it will fall below the bank's government-set target of 2.0 per cent.
The British central bank cut its key lending rate in January by half a percentage point to 1.5 per cent -- which was the lowest point since the BoE was established in 1694.
On Thursday, most analysts predict the BoE's nine-member Monetary Policy Committee (MPC) will cut rates by the same amount to a fresh all-time low of 1.0 per cent at the end of a two-day meeting.
That would also mark the fourth monthly rate cut in a row as Britain battles recession amid easing inflationary pressures.
"Once again the Bank of England's MPC head into their monthly meeting under severe pressure to cut interest rates," said IHS Global Insight economist Howard Archer in London.
Investec economist Philip Shaw said his house expected "a further 50-basis-point reduction in the bank rate, taking it to a new all-time low of 1.0 per cent."
Since the BoE's January rate cut, official data showed that Britain sank into a deep recession in the second half of 2008 as the global financial crisis raged.
Meanwhile, the European Central Bank was expected Thursday to hold borrowing costs at 2.0 per cent, after slashing them at a record pace since October to combat recession in the eurozone.
The US Federal Reserve and the Bank of Japan have already lowered their main interest rates to virtually zero as they seek to recover from the global credit crunch.
Britain is mired in recession for the first time since 1991 after gross domestic product shrank by 1.5 per cent in the fourth quarter of 2008 after a contraction of 0.6 per cent in the third.
The fourth quarter figure was also the biggest fall in GDP since 1980.
"With GDP suffering its largest drop for nearly 30 years in the fourth quarter of 2008 ... credit conditions remaining extremely tight and a period of deflation highly possible in the second half of this year, the pressure on the Bank of England to act is intense," Archer said.
He noted that the latest economic data reinforced the belief that "the economy is poised to suffer in 2009 the largest single year contraction since the Second World War."
Last week, the Fed froze US interest rates at zero to 0.25 per cent and also pledged to use "all available tools" to lift the country's battered economy out of a deep recession.
The BoE is meanwhile considering increasing money supply to ensure growth does not slow so much that inflation falls below target.
Bank governor Mervyn King said last month that the central bank was considering the "unconventional measures" that the British government placed at its disposal as part of a new package.
The government has said it will allow the BoE to purchase private sector assets worth up to 50 billion pounds (55 billion euros, 71 billion dollars), effectively pumping money directly into the system in an effort to kickstart lending in the economy.
The new scheme provides BoE policymakers with another tool in a bid to combat the possibility of deflation -- or a prolonged period of falling prices.
Figures published last month showed 12-month inflation sank to 3.1 per cent in December from 4.1 per cent in November, and there are fears it will fall below the bank's government-set target of 2.0 per cent.
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