UK Interest Rate: 5.5%

UK Interest Rates Forecast: Further cut considered likely early in 2008

Bank Cut Vote Was 9-0

The minutes of the most recent meeting of the Bank of England's Monetary Policy Committee (MPC) have shown that all nine members of the MPC voted unanimously to cut the bank's base interest rate from 5.75% to 5.5%.

In the minutes, the Bank commented that the slowdown in the housing market appeared to be "more pronounced than expected" and that a "substantial loosening of [monetary] policy" might be necessary to contain the potential consequences of the current credit crunch situation.

These comments and the evident strength of feeling about the cut have led analysts to think that another cut early next year might be more likely than previously thought.

Reuters Poll Backs Rate Cut Hopes

A poll of 49 leading economists by Reuters has found that 44 of those surveyed believe that the Bank of England will cut the base rate by a further 0.25% by the end of March 2008 - with 48/49 believing the cut will have taken place by the end of June.

Inflation Stays Put - Below Forecast

The government's preferred CPI measure of inflation remained unchanged at 2.1% in November, according to new figures from the Office of National Statistics (ONS). It had been forecast to rise to 2.2% on the back of higher energy and food prices, so this lack of growth will be considered positive news by the Bank of England.

With economic growth forecast to fall next year, one of the Bank's main concerns is to prevent a 'stagflation' situation - where the economy is not growing but prices are rising all the same. Controlling inflation is vital if stagflation is to be avoided, a consideration that means that the bank will consider the inflationary potential of any future interest rate cuts very carefully.