RBS predicts interest rate reductions

Interest rates could be cut by 50 basis points every month until February, the Royal Bank of Scotland (RBS) has predicted.

RBS economist Ross Walker noted that although it is possible the Bank of England’s monetary policy committee (MPC) could introduce a 100 point cut to the current rate of 4.5 per cent next week, a sequence of 50 point cuts is “more likely”.

Such a move could benefit those currently in credit card debt, as repayments could be reduced should lenders choose to pass the savings onto customers.

“The whole decision is tactical rather than economic and rates will have to come down quite a long way,” Mr Walker noted, adding that the extent of the cut will depend on the “trajectory” chosen by the MPC.

According to the Office for National Statistics, the country’s gross domestic product decreased by 0.5 per cent in the third quarter of 2008.

By Tom Musk