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Interest Rate Cut Expected Next Month And Another Cut Expected Later In The Year

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Homeowners can look forward to a merrier 2006 with the Bank of England poised to cut interest rates again, perhaps as soon as February, most City economists believe.

A year ago, with rates at 4.75 per cent, the Square Mile’s analysts sounded warnings over the threat that the Bank would raise rates still higher during 2005. Instead, the Bank’s Monetary Policy Committee (MPC) sat on its hands until the summer and then cut rates to 4.5 per cent as the economy weakened.

Now, the MPC is expected to deliver a further fillip to borrowers with a new cut that many expect to take place by spring, and perhaps a further reduction later in the year.

Expectations of lower rates are growing as oil prices ease back from last year’s record highs, which has helped headline inflation to fall back towards the Bank’s 2 per cent target. Analysts predict that inflation will continue to subside this year.

Economists also believe that pressure for a rate cut will increase as the Bank’s optimistic forecast for growth this year of 2.5 per cent proves too rosy.

The MPC recently signalled that a second rate cut, which had been expected in the early autumn but never materialised, may now be back on the agenda.

Steve Nickell, seen as the most “activist” committee member, broke ranks in December to vote for a quarter-point rate cut, arguing that, among other factors, slower growth in government spending would weigh on prospects for growth and inflation.

In the past, Professor Nickell has proved a bellwether for future action by the MPC.

Economists are pencilling in February, when the Bank publishes its next quarterly Inflation Report, as the first possible date for a cut. Some believe that rates could fall twice or more in 2006.

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Another Bill Gates/Bruno Powroznik sock-puppet attempting to spam the forum again.

What a pathetic little t>rd you are Bruno.

If it is Bruno he was held up as some kind of uber-bear genius only 15 months or so ago! Funny how a change of inclination gets different results!

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