Analysts expect 0.5% rate cut tomorrow

| March 4, 2009 | 0 Comments
Analysts expect 0.5% rate cut tomorrow

The Bank of England’s monetary policy committee (MPC) will cut interest rates tomorrow, according to a poll of industry economists.

Of the 11 experts polled, nine predicted a rate cut, whilst two said current economic conditions make it too close to call.

Economists polled included representatives from HSBC, Barclays, the Centre for Economics and Business Research, the Royal Institution of Chartered Surveyors, and Lloyds TSB.

All of them said further rate cuts will have little positive effect on the UK economy.

Trevor Williams, chief economist at Lloyds TSB predicted a 0.5% rate cut.

“Money markets need a margin above which to transact the cost of mortgage lending so I think half a per cent is about as low as the authorities are likely to go,” Williams said.

He added, however, that previous rate reductions ‘clearly haven’t worked’.

“This cut won’t work either,” he said.

Vicky Redwood, Capital Economics analyst, expects a rate cut of 0.5 percentage points this month, with further rate cuts in April.

She said: “We expect the MPC to follow its recent pattern and cut by another 50 basis points this month, before taking rates all the way to zero, or very close to it, in April.”

Michael Baxter, of Defaqto, said the Bank of England is failing to take the action needed to revive the economy.

The central bank is not reacting “as strongly as it should be to this crisis,” he said.

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