Bank of England Likely to Slash Interest Rate Further

November 18: The Bank of England originally considered cutting the base interest rate by 2 percent before settling on cutting the base interest rate by 1.5 percent earlier this month. The vote to cut the rate by 1.5 percent was voted unanimously by The Monetary Policy Committee.

With the UK economy falling for the first time since the early 1990’s into its first stage of recession, it’s expected that the economy will continue to shrink for the majority of 2009.

With reports from the Confederation of British Industry showing that companies are at their bleakest for almost three decades and retailers suffering from tighter credit and lack of consumer confidents the picture does not look bright for Britain.

Following last month’s government bailout package the Prime Minister, Gordon Brown said that they are still talking with the banks to encourage the same level of lending that we saw in 2007.

With big retail names like Debenhams and Marks & Spencer holding massive pre-Christmas sales to encourage Consumer spending, it just goes to show how nervous the retail market is.

Analysts predict that the Bank of England Base interest rate will be cut again by as much as 1 percent down to 2 percent. However if the BOE decide to cut the rate again, it’s unlikely that the banks will pass on the full rate cut, with some banks having their mortgage rates collared, which would stop borrowers enjoying the rate cut benefits.

Source: reuters