Interest rates forecast to fall to 1%

Thursday, 08 January 2009 12:01

Analysts are expecting a one per cent cut in the interest rate today, a poll for myfinances.co.uk has shown.

Although the consensus is taken to be a cut of 0.5 per cent, many of the analysts questioned believed the figure would be higher than this.

Of 13 analysts interviewed, six predicted the monetary policy committee (MPC) at the Bank of England will reduce the interest rate by a full percentage point, taking the base rate to one per cent.

A further four forecast a 0.5 per cent cut, while one foresaw a 0.75 per cent cut and another declined to give a figure but expects a "modest cut".

Arek Ohanissian, economist at Centre for Economic and Business Research (CEBR), said: "I guess the consensus is probably a 50 point basis cut but we believe that it will be either a zero or 100 [point cut]. We think that at this point there is really no point doing a 50 point cut. It's going to go down."

Martin Ellis, group economist at Halifax, added: "We are expecting the bank rate to be cut by one per cent.

"Our prediction is based on comment coming from Bank of England officials, and the tone of the latest MPC meeting, suggesting that what they think needs to be done in order to revive the economy and also the bad news that has come out on the economy in the past month.

"It has been increasingly bad, and all that points to the need to reduce rates further."

The MPC is due to make its announcement at noon and a cut would take the base rate to a historic low, as it has never been under two per cent in the Bank's entire 315-year history.

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