Bank of England Is Widely Tipped to Cut Rates This Week to Boost Slowing Economy.
The Bank of England is widely expected to cut interest rates on Thursday -- for the second time in three months -- as it attempts to shore up confidence in Britain's slowing economy.
Most economists expect the central bank's monetary policy committee to set aside conflicting concerns about accelerating inflation and trim official rates from 5.5 percent to 5.25 percent at the end of its two-day meeting on Thursday. "We are confident that the MPC will bring the bank rate down by 25 basis points," said Philip Shaw, an economist at Investec Securities. "Markets share this view."
The cut has been largely factored in after the bank held rates steady last month as it awaited more data on the economy -- and possibly attempted to avoid sending a panic signal to the markets with a second cut in as many months following the quarter of a percentage point trim in December.
Bank of England Governor Mervyn King has acknowledged that the bank is facing a "difficult balancing act," with inflationary pressures from higher energy and food prices and a falling British pound weighed up against data showing slowing economic activity and turbulence on financial markets.
The U.S. Federal Reserve knocked 1.25 percent off the cost of borrowing during the second half of January in response to the threat of a recession in the United States, and some economists tipped the Bank of England to take a similarly drastic move and slash rates by a full half a percentage point. However, the majority believe that inflationary fears will restrict the bank to a smaller quarter of a percentage point trim.
King, who was last week reappointed by the government for a second five-year term at the helm of the central bank, said last month that food and oil prices may drive inflation above 3 percent this year. Inflation is already running at 2.1 percent, above the government's target of 2 percent.
The Bank of England is widely expected to cut interest rates on Thursday -- for the second time in three months -- as it attempts to shore up confidence in Britain's slowing economy.
Most economists expect the central bank's monetary policy committee to set aside conflicting concerns about accelerating inflation and trim official rates from 5.5 percent to 5.25 percent at the end of its two-day meeting on Thursday. "We are confident that the MPC will bring the bank rate down by 25 basis points," said Philip Shaw, an economist at Investec Securities. "Markets share this view."
The cut has been largely factored in after the bank held rates steady last month as it awaited more data on the economy -- and possibly attempted to avoid sending a panic signal to the markets with a second cut in as many months following the quarter of a percentage point trim in December.
Bank of England Governor Mervyn King has acknowledged that the bank is facing a "difficult balancing act," with inflationary pressures from higher energy and food prices and a falling British pound weighed up against data showing slowing economic activity and turbulence on financial markets.
The U.S. Federal Reserve knocked 1.25 percent off the cost of borrowing during the second half of January in response to the threat of a recession in the United States, and some economists tipped the Bank of England to take a similarly drastic move and slash rates by a full half a percentage point. However, the majority believe that inflationary fears will restrict the bank to a smaller quarter of a percentage point trim.
King, who was last week reappointed by the government for a second five-year term at the helm of the central bank, said last month that food and oil prices may drive inflation above 3 percent this year. Inflation is already running at 2.1 percent, above the government's target of 2 percent.
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