The move raised hopes that the Bundesbank will cut its important discount interest rate from 8 per cent on 18 March or 1 April. That would help to relieve tension within the European exchange rate mechanism and might allow rate cuts elsewhere in Europe.
The FT-SE index rose by 17.3 points in busy trading to close at an all-time high of 2,922.1. Dealers said the cut in the German 'repo' interest rate - which closely influences market rates - from 8.49 to 8.25 per cent made it easier for Britain to consider a base rate cut.
But the Treasury and Bank of England have hinted strongly in recent days that they do not intend to use a German rates cut to justify a reduction in British base rate to accompany the Budget on 16 March.
German rate cut, page 17
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