Bank of England lines up interest rate fall

The Bank of England has indicated that a fall in interest rates could happen in the next few months, after it predicated slower short-term growth and rising inflation.

The latest quarterly Inflation Report included predictions that economic growth will fall to 2%, even if interest rates were lowered. They currently stand at 5.75%.

Warning that more disruption in the financial markets posed a risk to stock markets around the world, Bank of England governor Mervyn King told a press conference: “The near-term outlook is less benign for both inflation and growth.”

This has been taken as a sign that the Bank of England will soon lower interest rates. Experts assume that rates will be reduced to 5.5% early next year, with another fall later in the year.

Alan Clarke, economist at BNP Paribas, said: “The Bank of England has validated expectations that we are going to see two or three interest rate cuts in 2008.”

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