Barclays predicts 0.75% drop in interest rates by year end

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Barclays predicts 0.75% drop in interest rates by year end

Thu 8th May 2008

The equity strategist at Barclays Stockbrokers has predicted that interest rates will stand at 4.25 per cent at the end of 2008.

Henk Potts predicted that the Bank of England's monetary policy committee (MPC) will be mindful of inflation, but will reduce interest rates gradually.

"The MPC is caught between a slow growth rock and a high inflation hard place," he stated.

Mr Potts noted that economic growth is "clearly moderating", but said there is no "hard evidence" of a significant slowdown in UK aggregate demand.

He suggested that headline inflation is likely to remain raised for most of this year, while CPI inflation will probably move higher.

However, Mr Potts anticipated that it will even out again in 2009.

The MPC decided to hold rates today at five per cent, after cutting them by a quarter point in April.

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