Bank of England will not follow suit following Fed rate cuts
February 11, 2008
The US Federal Reserve has slashed interest rates considerably over the past couple of weeks, taking them down the first time by 0.75% amidst fears of a recession, and then reducing them further to 3%. The move resulted in many homeowners in the United States flocking to try and refinance to a lower rate deal whilst rates were at such as low.
However, industry experts have confirmed that the Bank of England will not be taking the same stance, and that if rates do fall in February it will be by only a quarter percent.
The minutes of the last Monetary Policy Committee meeting indicated that only one of the committee members had voted for the interest rate to be cut, resulting in the base rate remaining unchanged following the January meeting. In addition to taking the state of the economy into consideration MPC members are also having to consider the effects of rising inflation, making the decision with regards to whether or not to cut rates a difficult one.
Although many industry sectors and consumers have called for interest rates to be cut further following the December rate cut, the Bank of England has had to take inflation pressures into consideration as well, and this has affected its ability to cut rates.
However, most industry professionals are confident that rates will be cut in February, although this is only likely to be a cut of 0.25%. It is thought that there will be several interest rate cuts in total over the course of the year, and many industry professionals have predicted that the base rate could fall to around 4.5% by the end of this year.
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