Ulster economists look to interest rate cut
Published 07/10/2008 | 09:00
Local economists today predicted that interest rates were in line for a cut on Thursday - by perhaps as much as 0.5%.
Ulster Bank economist Richard Ramsey said it was possible that the Bank of England Monetary Policy Committee (MPC) would cut the rate from 5% to 4.5%.
But Alan Bridle, head of economics and research at Bank of Ireland Northern Ireland, was more cautious, predicting a cut of just 0.25%.
The MPC is due to start its two-day meeting tomorrow and announce its verdict on Thursday.
Interest rates have been pegged at 5% since April.
Mr Ramsey said: “Uncertainty and volatility continues to reign despite the approval of the $700bn bailout package on Friday.
“Rate cuts in the US, UK and Euro area are now top of the agenda. The Bank of England is the only central bank scheduled for an interest rate decision this week.
“However, with the marked deterioration in financial market and economic conditions, the prospect off the ECB, Fed and BoE making a co-ordinated interest rate announcement later this week would not come as a surprise.”
Mr Bridle said the latest tightening of conditions in the UK money markets might give the MPC sufficient “wriggle-room” to cut base rates to 4.75%.
He said: “The one complication remains inflation - the September numbers will not be released until October 14 and potentially could be above 5%, as against the target of 2%.
“The MPC should receive a preview of the data but it might be asking too much to expect all MPC members to sanction a rate cut against such a backdrop.”