The Bank of England’s base rate will not be cut until early next year, claims Lloyds TSB.
It expects the monetary policy committee (MPC) to vote maintain the current rate of 5.75 per cent at its meeting on Thursday.
According to the bank, the MPC will wait until February 2008 to cut rates, when it is evident that inflation is stable and the economy is definitely experiencing a slowdown.
Trevor Williams, UK chief economist for Lloyds TSB, said that until the growth of the economy falls to two per cent, compared with the three per cent seen this year, the MPC will not reduce interest rates.
“There will be a cut probably in May and another one mid-year, and I think rates will get down to five per cent during 2008 as the economy slows,” he commented.
As the possibility that inflation may continue to increase and as the economy awaits the full impact of the credit crisis, the MPC are faced with clear reasons to wait before changing the rate, reports the Financial Times.
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