Timing of interest rate reduction ‘in doubt’

A cut in the base rate of interest, which could help many people dealing with debt management difficulties, appears likely over the coming months, but the timing of the reduction is not easy to predict, one expert has made clear.

Reflecting on the minutes from the Bank of England’s monetary policy committee (MPC) meeting, Howard Archer, chief UK and European economist at Global Insight, concluded that there is “considerable uncertainty” over when to cut the cost of borrowing.

The base rate of interest has been increased five times since August of last year, but only two members of the MPC wanted to see it cut when they met earlier this month.

Mr Archer remarked: “Whether or not the first 25 basis point interest rate cut to 5.5 per cent comes as early as December, or is delayed until early 2008, will depend critically on just how weak the economic activity indicators are over the next couple of weeks.”

The Council of Mortgage Lenders recently forecast that borrowing costs will fall in the UK next year, but the number of repossessions will increase due to serious debt management problems for thousands of families.

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