Bank 'will respond' to market conditions

Posted: 26 Mar 2008 16:47:59 GMT

An interest rate cut is more likely because of the tougher lending conditions, the governor of the Bank of England said today.

An interest rate cut is more likely because of the tougher lending conditions, the governor of the Bank of England said today.

Mervyn King told the Treasury select committee deciding whether and how to change the baseline rate was a "difficult balancing act".

"There are big risks on either side. If the evidence moves more in favour of one set of risks than another then we will respond," he said.

He added that inflation was likely to rise to three per cent. It is already above the Bank's target of two per cent.

The Monetary Policy Committee (MPC) will decide on April 10th whether to hold or cut interest rates.

Last month, the MPC voted 7:2 in favour of freezing rates at 5.25 per cent, to the chagrin of many lenders.

Mr King described confidence in financial markets across the world as "fragile" in the wake of the credit crunch, which was fuelled by the mis-selling of mortgages in the US.


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