4
Feb
Base rate 'likely to hit zero'
The Bank of England's official base rate could reach zero per cent
by the middle of this year, it has been suggested.
According to Barclays Stockbrokers, the Bank's monetary policy
committee (MPC) needs to take action in order to offset the risk of
deflation.
Equity strategist at the bank Henk Potts explained that low demand
among consumers has combined with drops in commodity prices and the
temporary cut in value added tax to reverse the threat of
inflation.
As a result, he noted, the Bank may reduce the rate, something that
could make interest payments for mortgage customers cheaper.
"We anticipate that the MPC will cut rates … to one per cent
this week. We now expect the Bank of England to cut rates close to
zero by mid-year," said Mr Potts.
The centre for economics and business research made a similar
prediction last week, with senior economist Charles Davis stating
that rates are likely to remain low for some time.
