PMI may prompt new rate cut

The Chartered Institute of Purchasing and Supply purchasing managers' index (PMI) has shown a slowdown in manufacturing in December, news which may prompt the Bank of England monetary policy committee (MPC) to cut interest rates again.

December's PMI was 52.9, compared with 54.3 in November, a statistic which may be considered by the MPC to be relevant to the wider economic situation in the UK.

Fears that the economy was at risk of a major slowdown were given as the main reason for last month's rate cut in the MPC meeting minutes.

Another cut would have a potential impact in the housing market by reducing the cost of mortgages, which may help the level of house-buying to recover as affordability improves and in turn prompt more building of new homes.

The decision to cut the base rate from 5.75 per cent to 5.5 per cent last month was unanimous, with the committee also considering going further and making a 0.5 per cent cut.


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