10 Sep

Mortgage rate cut prospect expected to grow as inflationary factor plummets

Mortgage rate cut prospect expected to grow as inflationary factor plummets

A record monthly fall in the rate of factory gate inflation may help move the Bank of England's monetary policy committee (MPC) nearer a position where it can cut interest rates, it has been suggested.

In recent months rising inflation has caused the MPC to hold back from reducing the base rate despite concerns about the slowing economy, but August saw a 0.6 per cent fall in the cost of goods leaving factories, the highest drop in a month since records began in 1986.

The reduction, attributed to a passing on of falling oil costs, saw the annual rate also dip from 10.3 per cent to 9.7 per cent, compared with the 10.2 per cent figure expected by analysts.

By reducing one contributory factor to inflationary pressures, the shift may give the MPC a greater expectation that it can safely change the base rate.

The next decision by the body is due on October 9th, while minutes of this month's meeting will be published on September 17th.
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