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Interest rates could drop to 4%
30/05/2008 17:50:00
Interest rates could drop as low as four per cent, according to one economist, meaning people with savings will receive less interest.
Howard Archer, the chief European and UK economist for Global Insight, predicted the cuts will not occur until August "at the very earliest" but could eventually fall to the low level.
Mr Archer said it would be a gradual process and so predicted no change in the Bank of England's (BoE) next interest rate decision.
"We still believe that interest rates could eventually fall as low as 4.0 per cent in 2009, but it will be a gradual process," he added.
He said for the cut to occur the BoE would have to see "clear evidence" that wage moderation is continuing and reduced demand is undermining companies pricing power.
Last month the BoE decided to keep rates at five per cent, making no change.
It is predicted the same will occur this month as inflation leapt to a new record high.
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