10-08-2008
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The Bank of England Monetary Polciy Committee (MPC) reduced the bank rate by 0.5% to 4.5% on 8 October 2008.
Since April 2008 the bank rate has remained at 5%.
This should help reduce the cost of mortgages although some lenders are stalling.
Economists beleive that rates could drop to 2% or less. Alan Clarke of BNP Paribas declared that "1% or lower is not impossible", which would be a 300 year low.
The important trigger is the labour market: unemployment over 8% (currently 5.7% for August 2008)would be a disaster.'
Median forecasts show the bank rate at 4% by the end of the year, 3.5% by the end of March, 3.25% by June and then a final cut to 3% by September. Rates are seen beginning to rise again in 2010. reinflate the economy.
The Bank of England MPC needs to slash rates to help aschew economic meltdown. However its main aim is to control inflation, which is now set at 5.2% against the target of 2%. Economists expect more aggresive cuts in 2009 as inflation drops due to the economy slowing down or possible recession.