Base rate could reach four per cent

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In 2009, the base rate could drop to four per cent, according to an economist.

Howard Archer, chief UK and European economist at Global Insight, makes the forecast ahead of the June 5th base rate decision by the monetary policy committee (MPC).

In May, the Bank of Englands rate-setting body voted to maintain the current rate of five per cent.

But Mr Archer anticipates a gradual decline - by as much as one percentage point - over the coming year.

"The Bank of England will tread extremely carefully on the interest rate path for the time being," he comments.

"We still believe that interest rates could eventually fall as low as four per cent in 2009, but it will be a gradual process," he adds.

Mr Archer asserts that any further cuts are unlikely to take place in this MPC meeting or the next.

He predicts that the next base rate reduction will probably not occur until August at the earliest.

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