Friday 9th May 2008
Following the monetary policy committees (MPCs) decision to maintain the base rate at five per cent this week, economists disagree as to what will happen next.
Legal & General suggests that it is "just a matter of time" until a further rate cut is enforced by the Bank of England.
However, the financial services provider adds that the current economic climate still represents a "summer of discontent for borrowers".
Conversely, Lloyds TSB chief economist of corporate markets Trevor Williams forecasts it could take some time for the base rate to decrease further.
"The Bank of England is now likely to hold out until the economic picture becomes clearer," he contends.
Among the likely influencing factors, he identifies the Banks own efforts to ease the credit crunch and the overall slowing of the economy as particularly decisive.
Most crucial of all, he adds, is the "prospect of accelerating inflation" as the MPC attempts to meet its duty of keeping inflation at a flat rate of two per cent.
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