Experts predict cut in interest rates
February 13, 2008
Many economists are predicting that the Bank of England will be cutting interest rates this week following the Monetary Policy Committee meeting. It is widely predicted that the Bank of England will cut rates by 0.25%, taking the base rate from 5.5% to 5.25%, which will give borrowers on variable rate loans a little more breathing space. The Bank of England last cut the interest rate by 0.25% in December, but despite high expectations did not cut the rate in January due to inflationary pressures.
Analysts and economists are now stating that whilst there is a majority prediction that the Bank of England will cut rates this week, the cut is unlikely to be a huge one, and will probably be a 0.25% cut. The US Federal Reserve has recently slashed interest rates due to fears of a recession, but the Bank of England is not expected to follow suit, despite concerns over the slowing economy. This is because of additional pressures over rising inflation, which the Bank of England also has to consider.
Howard Archer from Global Insight stated: “Latest data and survey evidence indicate overall that while UK growth is currently clearly slowing appreciably, it is not collapsing. Consequently, the Bank of England seems unlikely to follow the US Federal Reserve in slashing interest rates. Instead, the Bank of England is likely to cut interest rates gradually but steadily.”
An official from the British Chambers of Commerce stated: “We would welcome a cut to 5% but we understand the MPC may be reluctant to give a misleading impression of panic. We urge the MPC to move to a 5% rate in two rapid steps. The longer it waits, the bigger the danger that the situation could deteriorate.”
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