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UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 7 12 2007

UK Interest Rate: 5.75%

UK Interest Rates Forecast: Rate cut expected early in 2008

Rate Decision Will "Not Be Easy"

The Bank of England's Monetary Policy Committee meets next week to decide whether the Bank should change its base interest rate in December.

Here's what some of the members of the MPC have been saying while out and about in the last week:

"We need to be very alert to the risk that the economy may be slowing too abruptly," At current interest rate levels monetary policy may be on the restrictive side."

Rachel Lomax, Deputy Governor of Bank of England

"Judging the appropriate monetary policy response will not be easy…We will need to weigh the evidence on the extent and likely duration of the slowdown in UK growth against the impact of inflationary pressures coming through from the global economy and their potential impact on inflation expectations."

Andrew Sentance, member of the Monetary Policy Committee

"The backdrop to our attempts to keep inflation in line with target is less favourable than it has been … What it will mean is if the imported component of inflation is somewhat higher, the domestically generated component needs to be somewhat lower to compensate, and that may mean we have to run a tighter monetary policy for a while to get that domestic inflation down"

Charlie Bean, Bank of England Chief Economist

It's perhaps unsurprising that all three of these MPC members have dropped loaded but guarded hints about the likely direction of interest rates this month.

The conflicting pressures of slowing growth and above-target inflation mean that the ideal solution may be something of a balancing act - but most analysts' money is still on a cut early in 2008 but no change before then.


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