21 Aug

MPC tipped to trim base rate this year

MPC tipped to trim base rate this year

The Bank of England will lower the base rate before the end of 2008, economists have predicted.

Following the publication of the minutes of this month's monetary policy committee (MPC) minutes for August, Jonathan Loynes of Capital Economics said it was unlikely that the pro-cut position of David Blanchflower will be adopted by any of his colleagues in the near future.

However, he added, by the end of the year the situation will change, with inflation passing its peak and economic slowdown having an impact on price.

Mr Loynes concluded: "We still think rates could be falling by year-end and will eventually drop much further than the markets expect."

Such a move could see significant reductions in the cost of mortgages and consequently boost the property market.

A similar forecast came from Lehman Brothers economist Peter Newland.

He told Interactive Investor that the general economic situation plus more stable oil prices would enable the MPC to carry out "the first of a string of rate cuts in November".
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