| UK
Interest Rate: 5.25%
UK
Interest Rates Forecast: Potential exists for further
cuts later this year
Bank
of England Cuts Rates Again
The
Bank of England has cut interest rates again, just two
months after December's surprise cut.
The
Bank's Monetary Policy Committee took the decision to
cut rates by 0.25% at their monthly meeting on 6/7th January.
The latest cut leaves interest rates
at 5.25% - but many economists expect further cuts later
this year.
The
MPC will have considered a number of factors when making
its decision - including:
·
Inflation: One of the Bank's primary
responsibilities is to maintain CPI inflation at its target
level of 2%. Its currently running at 2.1% and rising
energy and food prices are providing continuing upwards
pressure.
This
was probably a factor against a rate cut.
·
Housing Market: The housing market is
universally agreed to be weakening, with most house price
indices registering a fall in growth rates. There is some
danger that this could become a crash as a result of the
combination of falling house prices and the credit crunch.
This
would have been a factor in favour of a rate cut.
·
Economic Growth/Financial Markets: The
markets have been having a torrid time recently, with
the FTSE100 and most other indices falling steadily. Growth,
although still positive, is slowing also.
Both
of these factors would count in favour of a cut in interest
rates.
·
Currency: The pound is quite weak at
the moment - especially against the Euro. This means that
imports from Europe are getting more expensive - adding
to inflationary pressures. On the positive side, exports
to Europe are more affordable for European buyers - helping
stimulate growth.
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