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Rate cut expected next week

Catherine Deshayes

Expectations among economists are growing that the Bank of England's Monetary Policy Committee (MPC) will cut interest rates next week...

The base rate has remained unchanged since April but economist believe the recent turmoil and the evidence of manufacturing downturn provided by the Chartered Institute of  Purchasing and Supply/Markit purchasing manager's index this week point to a rate reduction.

Simon Hayes of Barclays Capital told the Financial Times that the economic situation "will make it relatively easy for the MPC to sell a rate cut as being consistent with hitting the inflation target in the medium term, even as inflation hits five per cent."

Michael Saunders of Citi European Economics suggested to the Daily Telegraph that there may be a "coordinated easing" of monetary policy by central banks around the world.

The comments come in the same week that former Cabinet Minister John Redwood told a Conservative Party conference fringe meeting that there should be a rate cut.

Should the MPC act on these concerns, this could help to lower the cost of mortgages.

The last MPC meeting saw the committee voting eight to one to keep the base rate at five per cent.

Source: www.hotproperty.co.uk