30 Jan

Interest rates 'will fall further'

Interest rates 'will fall further'

Interest rates will drop to or close to zero because of the fear of deflation, an analyst has stated.

Senior economist at the centre for economics and business research Charles Davis said the recession in the UK will prompt the Bank of England's monetary policy committee (MPC) to make more base rate cuts, commenting: "It could mean zero or they could stop at 0.25 but the key point is that we see them staying there for a very long period of time."

He added that this will involve rates being very low through 2009 and 2010, something that could help reduce the cost of interest rates.

The prospect of a cut by the MPC to zero has also been raised by one of the decision makers who could bring it about.

Committee member and Bank of England deputy governor Sir John Gieve told the Financial Times last month that such a move is a "possibility".
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