Interest rates 'likely to fall by 2009'

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Interest rates 'likely to fall by 2009'

Thu 3rd Apr 2008

In all likelihood, the Bank of England's monetary policy committee (MPC) will lower the base rate of interest to 4.5 per cent by 2009, it has been claimed.

Ross Walker, global economist for Royal Bank of Scotland (RBS), said that the bank predicts the MPC will slash rates as early as this month.

He said that RBS arrived at its forecast based on comments made by governor Mervyn King, who said "laconically" that the MPC was predisposed to cutting rates based on current conditions in the financial markets.

"We expect a further quarter-point cut to follow in the summer (July or August), before the expected peak in CPI inflation this autumn induces a hiatus ahead of a final 25bp reduction to 4.5 per cent in Q1 2009," Mr Walker commented.

The base rate is currently at 5.25 per cent and the next decision will be taken by the MPC on April 10th.

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