Further rate cuts look likely

The Bank of England's Monetary Policy Committee (MPC) has published the minutes from its December meeting.

It shows that all nine MPC members voted in favour of a rate cut and this could mean that further cuts may be just around the corner.

Interest rates were cut by 0.25 percentage points in the month, bringing them down from 5.75 per cent to 5.5 per cent.

Following the publication of the minutes, Howard Archer from Global Insight said that the MPC may act again in the first couple of months next year.

"Another interest rate cut in January is possible if the data and survey evidence is very weak," he commented.

"However, given recent rising inflation expectations, we suspect the MPC may prefer to wait until February to make sure that pay moderation is continuing in the early 2008 wage rounds.

"We expect interest rates to be cut by a further 25 basis points in both February (to 5.25 per cent) and May (to five per cent). Furthermore, we expect interest rates to be trimmed further to 4.75 per cent in the second half of 2008," continued Mr Archer.