MPC 'likely to cut rates next week'

News Article - 01 February 2008
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Interest rates will be cut by 25 basis points next Thursday, a number of financial institutions have predicted.

Of the seven participants polled by Adfero, all estimated that the Bank of England's monetary policy committee (MPC) would vote for a base rate of 5.25 per cent.

In the face of a looming recession, the MPC cut rates by 25 basis points in December after examining business productivity, house prices and spending.

However, in January the base rate was maintained, as the committee attempted to control costs with a rising rate of inflation.

Howard Archer, UK chief economist at Global Insight, commented that many are hoping for a more dramatic cut next week.

"Only a further very sharp fall in equity prices next week and last minute data indicating that the UK growth outlook has started to deteriorate sharply could possibly prompt a 50 basis point cut," he added.

Prime minister Minister Gordon Brown recently said that the recent financial turmoil is a mainly US-based problem and that there is careful planning underway to avoid a similar situation in the UK.

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