Borrowing costs cut forecast

The Bank of England will cut the base rate of interest by a quarter-point over the course of the next few months, one expert has predicted.

Howard Archer, chief UK and European economist at Global Insight, is convinced that the bank’s monetary policy committee (MPC) will opt to reduce the cost of borrowing in an effort to curb inflation either this month or next.

If the bank were to reduce the base rate to 5.25 per cent, some of the debt management pressures on borrowers in the UK could be eased and Mr Archer describes the MPC’s decision in January as being “on a knife edge”.

“We certainly would not be shocked if the MPC did cut rates on Thursday (January 10th) as there is a genuine case for further pre-emptive action to try and minimise the risk of a sharp economic slowdown over the coming months,” he said.

The Citizens Advice charity made clear recently that January is its busiest month for dealing with consumers struggling to become debt free.