The Bank of England today cut interest rates as a global credit crunch threatened wider economic damage.
Britain's central bank cut interest rates for the first time in more than two years, by a quarter point to 5.5 per cent.
"Conditions in financial markets have deteriorated and a tightening in the supply of credit to households and businesses is in train, posing downside risks to the outlook for both output and inflation," the bank said.
Royal Bank of Scotland, Britain's second-biggest bank, said it was on track to beat analysts' forecasts with 2007 profits of over £10 billion ($20.4 billion) after a lower-than-expected fall in the value of assets as a result of this year's credit crunch.
Top banks including Citigroup, Merrill Lynch and UBS have announced hefty losses and write-downs in recent weeks on assets tied to the crippled US subprime housing market.
President Bush will later unveil a plan to prevent a wave of home loan foreclosures that has threatened to knock the US economy into recession.
The plan, hammered out with mortgage industry chiefs, would bring relief to many of the
twlo million homeowners who took out adjustable rate loans with low rates that will soon jump.