Base rate U-turn

Posted: 05 Dec 2007 16:12:21 GMT

Leading economist Howard Archer believes that the base rate of interest will be cut on December 6th.

Leading economist Howard Archer believes that the base rate of interest will be cut on December 6th.

In a last minute change of heart, the Global Insight economist said that new data will put pressure on the Bank of England to slash interest rates.

Mr Archer has, for some time, been predicting that a cut would not be announced until early 2008.

"We had believed that ongoing concerns about significant inflationary pressures and considerable uncertainty as to what extent the UK economy is currently slowing would result in a majority of MPC [Monetary Policy Committee] members favouring unchanged interest rates on Thursday," he said.

"However, we had considered the vote to be finely balanced, and we now believe that a recent stream of markedly softer data and survey evidence relating to the services sector, consumer confidence and the housing market has given a decisive advantage to the rate cut case.

"We expect a majority of MPC members to come to the conclusion on Thursday that a 25 basis point interest rate cut to 5.5 per cent is justified to counter the increasing downside risks to growth," added Mr Archer.

The base rate of interest currently sits at 5.75 per cent, where it has been since July 2007.

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