Interest rates to fall slowly but surely

Posted: 12 Feb 2008 12:07:01 GMT

Capital Economics believes that the base rate of interest will fall to four per cent but not for some time.

Capital Economics believes that the base rate of interest will fall to four per cent but not for some time.

The firm has revealed that it is confident further rate cuts are on the cards but borrowers will have to wait for them.

In fact, the company said that the longer it takes the Bank of England's Monetary Policy Committee (MPC) to reduce rates, the further they will fall.

"The markets are increasingly coming round to our view that the slower the MPC cuts interest rates, the further interest rates might eventually have to fall," the Capital Economics statement read.

"While the markets' expectations for where interest rates will be in June have remained broadly stable over the last month, their expectations for where rates will be in June next year have fallen sharply.

"With inflation worries likely to increase over the coming months, we think that this move has further to go. We still think that interest rates will eventually fall to four per cent, but they are unlikely to get there until sometime next year," it continued.

The base rate of interest currently stands at 5.25 per cent.

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