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Bank of England lowers base rate to 5.5 per cent

Thursday 6th December 2007

Interest rates are now operating from a basis level of 5.5 per cent, as the Bank of Englands monetary policy committee (MPC) voted for a 0.25 per cent reduction in its December meeting.

Financial industry analysts expect the base rate to fall further over the coming year - but for many, that is as much as they agree on.

A recent poll of six institutions - including high street banks HSBC, Lloyds TSB and the Royal Bank of Scotland (RBS) - shows economists are unanimous in predicting rate cuts in 2008.

Independent financial adviser AWD Chase de Vere, consultancy the Centre for Economics and Business Research and market forecaster Global Insight complete the list of organisations covered.

But the level at which the base rate is expected to end 2008 could be anywhere from 4.75 per cent to 5.25 per cent, they predict.

Ahead of this months MPC meeting, RBS expected the most modest change over the 12 months, with economist Ross Walker predicting reductions in February and May to take the Banks benchmark to 5.25 per cent.

In light of the decision to lower rates some two months ahead of his forecast, Mr Walker may well revise his expectations over the coming weeks.

HSBC foresees the greatest change, with a spokesperson expecting the current shift to be repeated over the course of 2008.

"We have cuts again in quarter two, quarter three and quarter four - and you get 4.75 per cent by the end of the year," the economist states.

Such a sequence of moves by the MPC would take rates to a level not seen since October 2006.©

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