Sir Eddie seeks to calm investors

BANK of England Governor Sir Edward George today sought to reassure investors that the recent shock cut in interest rates did not herald more bad news on the economy.

George said the Bank's monetary policy committee was not hiding any gloomy news and the decision to lower the cost of borrowing was based entirely on information already in the public domain.

'There was absolutely nothing hidden in the woodwork. It was all in the minutes of the inflation report. To be honest, I was surprised the market was surprised,' George told MPs on the Treasury Select Committee.

Markets, which have been worried the MPC knew something others did not, failed to be reassured and the FTSE 100 index fell 57.4 points to 3644.4 amid increasing tension over war with Iraq. It was down 109 points at one stage.

Meanwhile, sterling fell to its lowest against the euro for four years after the Bank's chief economist Charlie Bean said that Britain's gaping trade gap needed a weaker pound. Sterling dropped as low as 68.35p.

Separately, Bank Governor-elect Mervyn King revealed that his decision to vote for a rate cut had not been an easy one, adding that he would have no problems being in the minority on a rate decision after taking over at the Bank's helm in July.