Fed cut may have to be mimicked in the UK, says expert

The US Federal Reserve's "dramatic economic action" of reducing the country's base rate of interest to between zero and 0.25 per cent may have to be followed by the Bank of England, it has been suggested.

Jonathan Loynes, chief European economist at research consultancy Capital Economics, states the fact that the Fed had to make such a move is an indication that the UK may have to consider "similar sorts of policies".

He explains this is because "after all, our economy is just as weak as the US economy".

Mr Loynes states he does not believe the UK can sit back and take no action and hope the Fed's move will help to strengthen the global economy.

Following the Fed's decision to reduce the key interest rate, the dollar's foreign currency exchange rate fell against other currencies.

The Bank's monetary policy committee is set to make its next decision about interest rates on January 8th 2009.