Interest rate cuts are looking more likely

Published: November 23, 2007

It is looking increasingly likely that the Bank of England will cut interest rates in the near future and ease pressure on those with mortgages, an industry expert has said.

Global Insight's chief UK and European economist, Howard Archer, revealed that it is looking probable that rates will fall back to five per cent by the third quarter of next year. Currently interest rates in the UK are 5.75 per cent.

Mr Archer made the prediction after the Bank published the minutes of this month's Monetary Policy Committee (MPC) meeting where it was decided that interest rates should remain unchanged in November.

According to the minutes, the committee voted 7-2 in favour of keeping rates unchanged.

"Whether or not the MPC acts in December or waits until early 2008, we now expect the Bank of England to trim interest rates three times by the third quarter of 2008, taking them down from 5.75 per cent to five per cent," Mr Archer commented.

"Given that the MPC believes that some slowdown in growth is necessary to dilute underlying inflationary pressures, a majority of MPC members will probably want to see clear evidence of a significant slowdown before sanctioning a rate cut."