Archer predicts base rate cut

Leading economist Howard Archer from Global Insight says that the Bank of England will cut the base rate of interest tomorrow (December 6th).

In a late change of heart, Mr Archer now says that he expects a 0.25 per cent cut to be announced, despite previously predicting that the rate would be maintained.

It comes in light of new data, which the economist says will force the Bank of England's Monetary Policy Committee (MPC) to act before the new year.

"We had believed that ongoing concerns about significant inflationary pressures and considerable uncertainty as to what extent the U.K. economy is currently slowing would result in a majority of MPC members favouring unchanged interest rates on Thursday," said Mr Archer.

"However, we had considered the vote to be finely balanced, and we now believe that a recent stream of markedly softer data and survey evidence relating to the services sector, consumer confidence and the housing market has given a decisive advantage to the rate cut case.

"We expect a majority of MPC members to come to the conclusion on Thursday that a 25 basis point interest rate cut to 5.5 per cent is justified to counter the increasing downside risks to growth," he continued.

The base rate of interest currently sits at 5.75 per cent.

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