Bank of England Move Difficult to Predict

Posted 2007-12-6

The Monetary Policy Committee will hold its regular monthly meeting today and experts predict the cost of borrowing will drop from the current level of 5.75 percent to 5.5 percent.

The Bank of England has been under increasing pressure to cut rates, which have risen five times since August 2006. Since July of this year, rates have held steady.

The LIBOR, the base lending rate that banks charge each other, has gone up dramatically, a factor which may influence any decision to cut rates. The increase in LIBOR is adding to the current difficulty in the credit market.

The MPC must determine how to balance a slowing economy with rising prices, so the decision could go either way, according to Reuters.

This month’s decision whether to cut the rate is “one of the tightest calls ever,” according to Howard Archer of Global Insight.

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