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Darling in US for finance meeting Darling in US for finance meeting
(30 minutes later)
Alistair Darling is flying to the US to discuss the co-ordinated cutting of interest rates by six central banks.Alistair Darling is flying to the US to discuss the co-ordinated cutting of interest rates by six central banks.
The UK chancellor will meet global financial leaders to discuss the half a percentage point reduction.The UK chancellor will meet global financial leaders to discuss the half a percentage point reduction.
UK and US share prices both fell despite Wednesday's surprise move, and Mr Darling's plan to inject £400bn pounds into the UK banking system. UK share prices fell on Wednesday, despite the surprise cut in interest rates and news of the government's £400bn plan for the UK banking system.
The cut in UK interest rates to 4.5% from 5% prompted six mortgage lenders to immediately reduce their rates.The cut in UK interest rates to 4.5% from 5% prompted six mortgage lenders to immediately reduce their rates.
'Enough?'
The last time the Bank of England cut rates in a special meeting was on 18 September 2001 - when rates came down from 5% to 4.75%.
The interest rate cut is aimed at helping ease the current financial crisis
But the news of the latest rate cut has not soothed the fears of the UK press, who question whether enough of a reduction has been made.
The Sun editorial asks "Is it enough?" and suggests that "more boldness will be needed - certainly another half per cent rate cut next month".
And the Mirror says the cut is a "down payment," and calls for the Bank of England "to be bold and slash rates again".
The mortgage lenders who immediately passed on the interest rate cut to borrowers did so by trimming their variable rates.
Halifax, Woolwich, Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, First Direct which is part of HSBC, Royal Bank of Scotland and NatWest all announced they were going to cut their standard variable rate by half a percentage point.Halifax, Woolwich, Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, First Direct which is part of HSBC, Royal Bank of Scotland and NatWest all announced they were going to cut their standard variable rate by half a percentage point.
Under the UK government's £400bn move, it will initially make extra capital available to eight of the UK's largest banks and building societies in return for preference shares in them. The last time the Bank of England cut rates in a special meeting was on 18 September 2001 - when rates were cut from 5% to 4.75%.
Extra funds
The rate cuts were aimed at helping to ease the current financial crisis
Under the UK government's £400bn move, banks will have to increase their capital by at least £25bn and can borrow from the government to do so.
An additional £25bn in extra capital will be available in exchange for the government receiving preference shares.
A further £100bn will be available in short-term loans from the Bank of England, on top of an existing loan facility worth £100bn.
And up to £250bn in loan guarantees will be available at commercial rates to encourage banks to lend to each other.
To participate in the scheme banks will have to sign up to a Financial Services Authority agreement on executive pay and dividends.