27 February 2008
A UK economist has suggested that the Bank of England's base rate could drop even further this year, which could lead to lower interest rates for those repaying loans.
Paul Dales of Capital Economics said that the monetary policy committee (MPC) may bring the base interest rate down as low as four per cent in the next 12 months.
He predicted that the MPC will "continue to cut rates slowly", which would mean that it will eventually have to make a larger reduction.
"If they slash rates in the style the [US Federal Reserve] is doing, then they may be able to get away with lowering rates to something like 4.5 [per cent]," he commented.
However, Mr Dales added, if the MPC "takes their time due to inflation concerns", rates will likely need to be cut to four per cent.
Consumers with loans may be able to benefit from such reductions, depending on the reaction of financial providers. Commenting on the MPC's decision earlier this month to slash rates by 0.25 per cent, Mike Naylor of uSwitch said that the move "is only good news for consumers if banks do the right thing and pass it on".
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