| UK
Interest Rate: 5.75%
UK
Interest Rates Forecast: A cut is likely, but probably
not before 2008
Bank
Governor Indicates Immediate Rate Cut Unlikely
In
a speech this week to the Northern Ireland Chamber of
Commerce, Bank of England Governor Mervyn King stressed
that the Bank's Monetary Policy Committee was still assessing
the effects of the current credit crunch and was in no
rush to cut interest rates.
King
emphasised that the MPC's main role was to ensure inflation
met its 2% target and stressed that interest rates would
not be cut simply to protect banks from the consequences
of incorrectly-priced risk.
Commenting
on the recent bail-out of Northern Rock and the general
role of the Bank of England in such circumstances, he
used the analogy of the fire service.
King
observed that while fire services will put out fires started
by people smoking in bed, they "do not offer free
insurance for people who smoke in bed or set fire to their
own house, thereby encouraging them to take risks that
endanger others."
Assessing
the underlying meaning of King's speech, Global Insight
economist Howard Archer said that he believed interest
rates would only be cut before the end of 2007 if "growth
was hit severely by the credit crunch".
At
present, such a severe impact seems relatively unlikely,
and most analysts concurred with Archer's interpretation
of Mervyn King's message.
Archer
also said that he believes the Bank of England will cut
interest rates to 5.25% by the middle
of 2008.
Interest
Rate Divide Widens
Despite
the Bank of England base rate remaining unchanged again
this month, savings, mortgage and loan rates continue
to fluctuate across the UK.
Broadly
speaking, variable loan and mortgage interest
rates are continuing to rise slightly, while
fixed mortgage rates and savings rates are now slipping
slightly.
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