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| Version 0 | Version 1 |
|---|---|
| Economists forecast cut in rates | Economists forecast cut in rates |
| (about 1 hour later) | |
| UK interest rates are expected to be cut from 5.5% during the latest meeting of the Bank of England. | |
| Analysts say the Bank is likely to bring down the cost of borrowing on Thursday, but borrowers shouldn't expect drastic cuts in rates. | Analysts say the Bank is likely to bring down the cost of borrowing on Thursday, but borrowers shouldn't expect drastic cuts in rates. |
| It is widely predicted the Monetary Policy Committee (MPC) will trim rates by a quarter of a point to 5.25%. | It is widely predicted the Monetary Policy Committee (MPC) will trim rates by a quarter of a point to 5.25%. |
| But it is thought concerns over rising inflation will stop the MPC making the type of deep cuts seen in the US. | But it is thought concerns over rising inflation will stop the MPC making the type of deep cuts seen in the US. |
| The rate decision comes after the British Retail Consortium on Wednesday said shop price inflation picked up in January to 1.2%. | The rate decision comes after the British Retail Consortium on Wednesday said shop price inflation picked up in January to 1.2%. |
| Balancing act | Balancing act |
| Food prices showed the biggest increase, up 3.9% compared to the previous year. | Food prices showed the biggest increase, up 3.9% compared to the previous year. |
| Two other reports this week showed that the economy is holding up. | Two other reports this week showed that the economy is holding up. |
| The services sector showed a slight increase in growth in January, while the Halifax reported that house prices were unchanged last month. | The services sector showed a slight increase in growth in January, while the Halifax reported that house prices were unchanged last month. |
| "Latest data and survey evidence indicate overall that while UK growth is currently clearly slowing appreciably, it is not collapsing," said Howard Archer, chief UK economist at Global Insight. | "Latest data and survey evidence indicate overall that while UK growth is currently clearly slowing appreciably, it is not collapsing," said Howard Archer, chief UK economist at Global Insight. |
| "Consequently, the Bank of England seems unlikely to follow the US Federal Reserve in slashing interest rates. | "Consequently, the Bank of England seems unlikely to follow the US Federal Reserve in slashing interest rates. |
| "Instead, the Bank of England is likely to cut interest rates gradually but steadily." | "Instead, the Bank of England is likely to cut interest rates gradually but steadily." |
| The Confederation of British Industry's chief economic adviser, Ian McCafferty, argued that despite short-term inflationary pressures, "there are clear signs that the economy is beginning to slow". | |
| "A modest cut now would help ensure a soft economic landing, without undermining the Bank's credibility on inflation." | |
| Rapid steps | Rapid steps |
| UK business is looking for a more aggressive attitude to interest rates. | UK business is looking for a more aggressive attitude to interest rates. |
| Economic adviser to the British Chambers of Commerce, David Kern said: "We would welcome a cut to 5% but we understand the MPC may be reluctant to give a misleading impression of panic. | Economic adviser to the British Chambers of Commerce, David Kern said: "We would welcome a cut to 5% but we understand the MPC may be reluctant to give a misleading impression of panic. |
| "We urge the MPC to move to a 5% rate in two rapid steps. | "We urge the MPC to move to a 5% rate in two rapid steps. |
| The longer it waits, the bigger the danger that the situation could deteriorate." | The longer it waits, the bigger the danger that the situation could deteriorate." |
| The MPC voted 8-1 to keep interest rates on hold in January, and said the risk of inflation had "worsened markedly". | The MPC voted 8-1 to keep interest rates on hold in January, and said the risk of inflation had "worsened markedly". |
| Although the most recent UK inflation data showed that inflation remained at 2.1% for the third month in a row during December, energy prices have increased substantially since then. | Although the most recent UK inflation data showed that inflation remained at 2.1% for the third month in a row during December, energy prices have increased substantially since then. |
| Exchange rates | Exchange rates |
| British Gas, Npower, EDF and Scottish Power have all announced double digit increases in fuel prices this year. | British Gas, Npower, EDF and Scottish Power have all announced double digit increases in fuel prices this year. |
| Policy makers will also be keeping on eye on the pound. | Policy makers will also be keeping on eye on the pound. |
| It has fallen 7% against the dollar since November and was down again on Wednesday. | It has fallen 7% against the dollar since November and was down again on Wednesday. |
| A strong currency helps keep inflation low by making imports relatively cheaper. | A strong currency helps keep inflation low by making imports relatively cheaper. |