Interest rate could hit 'zero per cent'

There is a "reasonable" possibility that interest rates could hit zero per cent next year, according to Defaqto.

Mr Baxter, economist at Defaqto, suggests that there are a number of places in the world where the rate of interest could fall to zero over the coming months and the UK could be one of them.

Interest rates could fall to that level in Japan in the next few weeks, or even days, while the same could happen in the US before the end of this year, he says.

"I think there has got to be a possibility that it could happen in the UK at some stage next year," he added.

The Bank of England's Monetary Policy Committee last met on October 8th 2008 and cut the interest rate by 50 basis points to 4.5 per cent. The next interest rate decision is due to take place on November 6th 2008.