May rate cut on the cards

Published: February 13, 2008

The base rate of interest looks set to be cut again in May, spelling good news for those concerned about mortgage interest rates.

Global Insight economist Howard Archer made the comments following the publication of the Bank of England's Quarterly Inflation Report.

The report revealed that consumer price inflation will be just above the two per cent target in two year's time.

Mr Archer said that he expects the Bank to announce a number of rate cuts before the end of 2008 but warned that borrowers will need to be patient.

"Given the current worrying inflation situation, we believe the Bank of England will be reluctant to cut interest rates again until May unless there are clear signs that economic activity is slowing sharply," he commented.

"We expect interest rates to be cut by 25 basis points to five per cent in May and still forecast them to be down to 4.5 per cent by the end of the year and to four per cent in 2009 as markedly slowing growth dilutes underlying inflationary pressures," continued Mr Archer.

The base rate of interest currently sits at a 12-month low of 5.25 per cent.