Bank of England Expected to Slash Rates Again

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Bank of England Expected to Slash Rates Again

Wed, 07 Jan 2009

Experts are forecasting yet another interest rate cut from the Bank of England this week as it looks to stabilise the continued slide of the British economy. A cut of 0.5 percentage points is expected by the majority of analysts, though some are even forecasting a 1.0 per cent cut which would take the base rate down to an astonishingly low, 1.0 per cent – easily the lowest level ever to be recorded.

The central Bank has already cut interest rates by 3 per cent since October, in an attempt to free up the availability of credit kick start the market by encouraging consumer spending rather than investment in savings accounts .

Investec’s chief economist, Philip Shaw, said he expected further cuts to take place in the coming months. Mr Shaw said, ‘We have pencilled in the Bank rate bottoming out at 0.75 percent, but we stand ready to change this if the Bank of England hints that rates could fall further.‘

Some have even called for quantitative easing – literally boosting the country’s money supply – though Mr Shaw is dubious of this. He said, ‘We are sceptical that quantitative easing in the strict sense, i.e. flooding the banking system with reserves will give the real economy a significant push, especially as this did not appear to have a material effect in Japan.’

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