Favourable inflation figure may lead to rate cut

The Bank of England may cut the base rate of interest early in 2008 after it was revealed that consumer price inflation stabilised in November.

Figures from the Bank show that inflation was 2.1 per cent in the month, only marginally higher than the two per cent target.

It comes despite upward pressures from high fuel and food prices and Howard Archer from Global Insight believes that an interest rate cut is on the cards.

"November's lower than-expected inflation data keeps the door open for another interest rate cut early in 2008," said the economist.

"We currently expect interest rates to be cut by a further 25 basis points in both February (to 5.25 per cent) and May (to five per cent).

"Furthermore, it is highly possible that interest rates could move below five per cent in the second half of 2008," added Mr Archer.

December's base rate cut was the first for over two years.

Related Articles