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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.
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