Bank expected to hold rates
Published On 5 December 2007
The Bank of England is widely expected to hold the base rate of interest at its current level when it meets tomorrow (December 6th), with cuts anticipated in the new year.Most leading financial institutions are forecasting that the Bank's monetary policy committee will hold interest rates at 5.75 per cent for another month.
Ross Walker, economist at Royal Bank of Scotland, said he believed the rate would be held for December, falling to 5.5 per cent in February 2008 and to 5.25 per cent in May 2008.
The Centre for Economics and Business Research gives a 20 per cent chance there will be a cut this month, but is more optimistic about 2008. A spokesperson said there would be "a 90 per cent chance of a cut by the first quarter of 2008", falling to "five per cent in the third quarter of 2008".
Although a rate cut seems unlikely tomorrow, the Bank has been under pressure from retailers to cut the base rate to boost consumer confidence. The British Retail Consortium said recently that three-monthly retail sales fell from two per cent to 1.8 per cent in October, while Tesco has dismissed food inflation fears to join calls for a base rate reduction.
Howard Archer, chief UK and European Economist at Global Insight, said that this means a December cut can't be ruled out. "We are going for no change, but we wouldn't be surprised if they do. It's right on the margin."
