21
Aug
MPC tipped to trim base rate this year
The Bank of England will lower the base rate before the end of
2008, economists have predicted.
Following the publication of the minutes of this month's monetary
policy committee (MPC) minutes for August, Jonathan Loynes of
Capital Economics said it was unlikely that the pro-cut position of
David Blanchflower will be adopted by any of his colleagues in the
near future.
However, he added, by the end of the year the situation will
change, with inflation passing its peak and economic slowdown
having an impact on price.
Mr Loynes concluded: "We still think rates could be falling by
year-end and will eventually drop much further than the markets
expect."
Such a move could see significant reductions in the cost of
mortgages and consequently boost the property market.
A similar forecast came from Lehman Brothers economist Peter
Newland.
He told Interactive Investor that the general economic situation
plus more stable oil prices would enable the MPC to carry out "the
first of a string of rate cuts in November".
