Bank of England Interest Rate Options
Published / Last Updated on 22/08/2008
Bank of England Interest Rate Options
Analysts were unsurprised by the MPC’s decision to keep interest rates on hold at 5 per cent. Most agreed that the Committee remained somewhat cornered, unable to cut rates to boost the flagging economy, while inflationary pressures persist.
Our view is that the UK slowdown will continue and reduce economic growth to a deflation position, removing the need for spending controls to curb inflation. The Bank of England will then be able to deliver, we suggest, significant interest rate cuts in 2009 as inflation falls back towards target. However, this expansionary policy will not be timely enough to prevent another year of weak UK growth in 2009.
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