UK Money News
5th March 2008
Interest rates 'to hit 4% next year'
Interest rates could fall as low as four per cent next year, analysts claim.
Ahead of the Bank of England's March decision tomorrow, most commentators are expecting the cost of borrowing to stay at 5.25 per cent.
However, there is a general consensus that further cuts, following those in December and February, are on the way.
Sebastian Mackay of Scottish Widows Investment Partners (SWIP) said he expected a significant fall by the second half of 2009.
"Although we think interest rates will be cut by a further 1.25 per cent over the next 18 months we don't think the MPC will cut rates this week," he said.
SWIP expects GDP growth to slow considerably, dropping from 3.1 per cent to 1.4 per cent this year.
"As growth weakens the likelihood of higher food and energy prices being passed on to other prices will recede but the MPC are unlikely to take a gamble and will only cut rates at a relatively gradual pace," Mr Mackay added.
The base rate currently stands at 5.25 per cent. The Bank of England announces its March decision at midday tomorrow.
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