MPC faces tight call

10-Jan-2008

The Bank of England's monetary policy committee (MPC) faces a tight call today when it announces its interest rate decision for January.

Most analysts expect the base rate to remain at 5.5 per cent, but there is a general consensus that a cut is coming soon.

The housing market and consumer spending are slowing and with the ripple effects of the liquidity squeeze still being felt, there is growing pressure for lower interest rates.

"We think there is another change coming soon but it is more likely to be in February than January," said Martin Ellis, chief economist at high street bank, the Halifax.

"Our view is that they may not cut it this month, after cutting in December – they may wait until February and then cut," Trevor Williams, UK economist at Lloyds TSB, added.

A cut in interest rates would be welcomed by businesses and any individuals with large debts, such as mortgages.

First-time buyers would be especially keen to see the base rate fall, as it would further boost their chances of buying their first property.

The liquidity squeeze is making credit harder to obtain and another cut in the base rate would help get things moving again.


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