Probable Delay In Interest Rate Cut

Homeowners hoping for back-to-back cuts in interest rates from the Bank of England on Thursday are likely to be disappointed as BoE is in no hurry.

London (Shakespearefinance) May06, 2008:Inflation concerns mean the Bank of England's monetary policy committee may well leave it until June before shaving borrowing costs for the fourth time since last December.

Consumer price inflation is above the Bank's 2% target rate and still seems likely to reach at least 3% by may 2008 as higher energy and food prices take their toll along with the weaker pound.

At this week's meeting, members of the MPC will be handed the latest projections on economic growth, consumer price index and inflation, ahead of the publication of the Bank's quarterly inflation report on May 14.

The MPC cut rates to 5% last month, but two members - Tim Besley and Andrew Sentance - voted against the rate cut move because of the weakening pound and rising oil costs of $100-plus a barrel which had fed through into output prices.

Global Insight economist Howard Archer said: 'Signs that the UK economic slowdown could be deepening and ongoing squeezed credit conditions heaps pressure on the Bank of England to cut interest rates again sooner rather than later'.

'A quarter point cut to 4.75% is very possible on Thursday, although we suspect that most MPC members would certainly prefer to delay acting until June 2008 given elevated inflation risks.'We expect rates will fall to 4% by the end of this year and to 3.75% in the first quarter of 2009.'

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