This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.

You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/7230338.stm

The article has changed 5 times. There is an RSS feed of changes available.

Version 2 Version 3
Economists forecast cut in rates Economists forecast cut in rates
(about 5 hours later)
UK interest rates are expected to be cut from 5.5% during the latest meeting of the Bank of England. The Bank of England is expected to cut UK interest rates by a quarter of a percentage point to 5.25% from 5.5%.
Analysts say the Bank is likely to bring down the cost of borrowing, but borrowers should not expect drastic cuts in rates. However, analysts said that while they expect borrowing costs to fall, concerns about inflation would prohibit large cuts of the size seen in the US.
It is widely predicted the Monetary Policy Committee (MPC) will trim rates by a quarter of a point to 5.25%. The Bank of England's Monetary Policy Committee (MPC) will announce its rate decision at 1200 GMT after a two-day meeting.
But it is thought concerns over rising inflation will stop the MPC making the type of deep cuts seen in the US. Many observers are predicting that rates will fall further this year.
The rate decision comes after the British Retail Consortium on Wednesday said shop price inflation picked up in January to 1.2%. However, a lot will now depend on how the UK economy performs, analysts said.
Balancing act
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.
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". Balancing act
"A modest cut now would help ensure a soft economic landing, without undermining the Bank's credibility on inflation." Analysts said that the Bank has to juggle the threat of slowing economic growth with the risk of faster price growth.
Rapid steps The MPC voted 8-1 to keep interest rates on hold in January, and said the risk of inflation had "worsened markedly".
Thursday's rate decision comes after the British Retail Consortium said shop price inflation picked up in January to 1.2%. Food prices showed the biggest increase, up 3.9% compared to the previous year.
And while the most recent UK inflation data showed that national consumer price inflation remained at 2.1% for the third month in a row during December, energy prices have increased substantially since then.
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.
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.
'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 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".
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. "A modest cut now would help ensure a soft economic landing, without undermining the Bank's credibility on inflation."
Exchange rates
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.
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.