By John Fraher Nov. 6 (Bloomberg) -- The Bank of England led European central banks in reducing borrowing costs to counter the worst financial crisis in almost a century, cutting its key rate by 1.5 percentage points to the lowest level since 1955. The U.K. central bank reduced its key rate by the most since 1992, taking it to 3 percent. The European Central Bank lowered its benchmark by 50 basis points to 3.25 percent and Swiss policy makers cut their main lending rate by the same margin to 2 percent after an unscheduled meeting. ``It's absolutely staggering and deeply impressive,'' said Brian Hilliard, director of economic research at Societe Generale in London. ``They are clearly grasping the nettle and taking deep action. Boy, this is going to have an impact.'' Policy makers around the world are dashing to limit the damage from the global credit squeeze, cutting interest rates and pumping unlimited funds into the banking system. The International Monetary Fund said today the U.K. will be the worst performer among the Group of Seven economies next year, followed by Germany, the euro region's largest economy. The pound rose against the dollar and the euro after the announcements. The currency climbed as high as $1.6037, from $1.5910 yesterday, and to 80.06 pence per euro, from 81.46 pence. Slowing growth is easing inflation pressures, which had limited the ability of European central banks to follow the Federal Reserve in paring rates earlier this year. Significant Cut ``The risks to inflation have shifted decisively to the downside,'' the Monetary Policy Committee said after today's decision. Policy makers ``judged that a significant reduction in Bank Rate was necessary now in order to meet the 2 percent target'' for inflation. ECB President Jean-Claude Trichet said in a press conference after today's decision that he can't rule out a further reduction in interest rates because the global financial crisis may lead to an extended economic slump. ``The intensification and broadening of the financial turmoil is likely to dampen global and euro-area demand for a rather protracted period,'' he said. ``Price, cost and wage pressures should also moderate.'' The Fed last month reduced its benchmark rate to 1 percent, matching the lowest in half a century. The International Monetary Fund today predicted economic contractions in the U.S., Japan and euro region next year. Prospects for Europe's economy worsened after the collapse of Lehman Brothers Holdings Inc. in September threw financial markets into disarray. German factory orders plunged 8 percent in September, the biggest drop since at least 1991, and U.K. manufacturing is in its longest contraction since 1980. Swiss exports declined for the first time in almost four years in September. The global slowdown is cutting demand for commodities, easing price pressures in the global economy. The price of crude oil has dropped by half since it reached a record $147.27 per barrel in July, and wheat prices had their worst monthly loss in 22 years in October. To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.net

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