Base rate decision has industry split

Tomorrow's (January 10th) decision on the base rate of interest is hanging in the balance and has divided opinion among analysts.

The Bank of England's Monetary Policy Committee (MPC) is due to meet this week to announce the base rate for January and commentators appear to be completely stumped as to which way the MPC will vote.

Howard Archer from Global Insight has described the decision as "an exceptionally tight call" but he believes that the MPC will wait until February before announcing a cut.

A similar view is held by the Royal Bank of Scotland but Barclays Capital anticipates a reduction on Thursday.

"We are changing our rate view. We now expect 25 basis point rate cuts in January, February and April, taking the bank rate to 4.75 per cent," said Simon Hayes, UK economist at the firm.

"We had previously expected cuts in February and May," he added.

If the rate is reduced tomorrow, it will be the first time that the Bank has announced cuts in consecutive months since October and November 2001.

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