4 Feb

Base rate 'likely to hit zero'

Base rate 'likely to hit zero'

The Bank of England's official base rate could reach zero per cent by the middle of this year, it has been suggested.

According to Barclays Stockbrokers, the Bank's monetary policy committee (MPC) needs to take action in order to offset the risk of deflation.

Equity strategist at the bank Henk Potts explained that low demand among consumers has combined with drops in commodity prices and the temporary cut in value added tax to reverse the threat of inflation.

As a result, he noted, the Bank may reduce the rate, something that could make interest payments for mortgage customers cheaper.

"We anticipate that the MPC will cut rates … to one per cent this week. We now expect the Bank of England to cut rates close to zero by mid-year," said Mr Potts.

The centre for economics and business research made a similar prediction last week, with senior economist Charles Davis stating that rates are likely to remain low for some time.
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