| Current
UK Interest Rate: 5.75%
UK
Interest Rates Forecast: 5.75% is likely to be the
peak, with rates falling late this year or in the
first half of 2008
Economist
Polled Think Rate Rise Unlikely
Forty
out of fifty-two economists questioned in a new poll
by Reuters believe that interest rates
will remain on hold for the remainder of 2007, with
only 10 forecasting a cut to 5.5% in November.
However,
there was little disagreement over the eventual need
for a rate cut - Ross Walker, of RBS, commented that
"A Bank Rate cut is a question of when, not if…".
Of
those surveyed, the median forecast put rates at 5.5%
by the middle of next year and at 5.25% by the end
of 2008 - in line with expectations of gradually falling
inflationary pressures.
MPC
Unanimous Over September Rate Hold
The
minutes of the September meeting of the Monetary Policy
Committee have revealed that they voted 9-0 in favour
of leaving interest rates unchanged
earlier this month.
The
minutes commented that "The impact of financial
market disruption … was still very unclear",
although they also commented that the upside risks
to inflation they described in August's inflation
report have now "probably receded".
Most
analysts agreed that the minutes suggest the MPC are
now taking a more neutral, 'wait-and-see' approach
to future interest rate decisions
than was the case a few months ago.
Inflation
Falls Again
Inflation
has fallen again from 1.9% in July to 1.8% in August,
receding further below the government's target of
2%.
Some
analysts suspected that July's unexpected fall was
a result of short-term high street discounting and
might be reversed in August, so this new drop will
be welcome news for both the Treasury and the Bank
of England.
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