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Bank of England Cuts Rate to 5.25%

The Bank of England cut its main interest rate by a quarter point to 5.25 percent on Thursday, as widely expected, amid worries about a slowdown in the economy.

"The prospects for output growth abroad have deteriorated and the disruption to global financial markets has continued," the bank said in a statement.

The BoE made a similar cut in December and economists predict that the monetary policy easing will continue.

"I think where there is some difference is how far interest rates can go down. We'll have to see the economic data over the next months," James Shugg, senior economist at Westpac Bank, told "Power Lunch Europe."

The pound slipped 0.4 percent against the dollar after the decision.

Price pressures remain in focus, the central bank said, leaving its options open for the next move.

"Given this outlook for inflation, some slowing of demand growth, by reducing the pressure on capacity, is likely to be necessary to return inflation to target in the medium term," the Bank of England's statement said.

The danger of price rises is not as big as to stop the bank from cutting further, analysts said.

"For the BoE, I don’t think the dilemma is really there," Shugg said. "Weaker growth does feed into the final view…the reason they're cutting is growth will slow enough to pull inflation further down the track."

Shares slipped even further after the announcement, with investors hoping for a clearer hint at further rate cuts.

"I would guess the money markets would be a bit disappointed by the degree of balance. I think they were looking for a more dovish statement," Geoffrey Dicks, chief UK economist at RBS, told "Power Lunch Europe."

Contact Europe: Economy

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