Warning over interest rate expectations

Anyone hoping that the UK will see the kind of radical, rapid rate-slashing policy that has taken place in the US being repeated here by the Bank of England's monetary policy committee (MPC) will be disappointed, a financial expert has said.

James Caldwell, director of finance website Fairinvestment.co.uk, commented that while there are likely to be more interest rate cuts this year, the MPC is liable to act "with an air of caution" amid concerns about inflationary pressures and the broader state of the economy.

He was speaking as the company announced the results of its poll into interest rates in Britain over the next few months, in which 56 per cent of respondents predicted that the base rate will drop below five per cent by the start of 2009.

The comments suggest those hoping for a major cut in mortgage rates will not have this hope fulfilled, which may make some consider the cost-saving possibilities of self build.

In his budget yesterday chancellor Alistair Darling said he was writing to the governor of the Bank of England to restate that two per cent is to remain as the target rate of inflation for the MPC to achieve.


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