Some economists predict interest rates could fall to 4% by end of next year
December 30, 2007
Earlier this week the Bank of England announced that the base interest rate would be falling by a quarter point from 5.75% to 5.5%. This followed a series of five interest rate hikes since August 2006, which took the base rate from 4.5% to 5.75% by July of this year. Since July interest rates have remained on hold at 5.75% despite calls from industry professionals and consumers for the rate to be cut.
After the December Monetary Policy Committee meeting the Bank of England announced the news that many had been waiting for – that interest rates had been cut by 0.25%. However, although this is good news for struggling industries and homeowners, many experts state that in order to avoid a recession the base rate may have to fall as low at 4%. Many experts have predicted that there will be another couple of interest rate cuts in 2008, with prediction that the next rate cut could be as early as January.
Some are stating that the interest rate could fall as low as 4% by the end of next year in order to avoid a recession.
One official from Bear Stearns stated: ‘The Bank of England has pulled the ripcord to much lower rates. We could well be seeing them coming down to 4% in this cycle.’ A CML spokesman stated after the latest interest rate cut: ‘A reduction in interest rates is exactly what the market needs and will benefit consumers.’
It is thought that a number of factors have resulted in the Bank of England’s decision to cut the rate this months, and this includes a slowing economy, a housing slump, rising repossessions as homeowner struggle with their mortgage repayments, and the chaos caused in the financial markets by the global credit crunch.
Alan Wright
30th December 2007
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