Bank of England indicates moderate rate cuts only
The Bank of England has indicated today that it will not cut interest rates as much as many in the financial sector expect it to this year.
Bank of England to cut growth forecastsThe Bank released its quarterly inflation report today, in which it predicted higher inflation and a slowing of growth from around current levels of three per cent down to under two per cent by the end of 2008.
For this reason the Bank said it would not be cutting interest rates drastically throughout this year.
Mervyn King, Governor of the Bank of England said that tighter credit conditions and rising energy and food prices would mean rising inflation in 2008.
King said "The [Monetary Policy] Committee's aim is to bring inflation back to the 2% target in the medium term. But in doing so, it faces a difficult balancing act."
The Bank's report suggested that inflation would be significantly higher than it's two per cent target for two years should interest rates be cut down to 4.5 per cent by the end of the year, as some economists have predicted.
However the report also suggested that inflation would probably fall below the 2 per cent target if interest rates remained as they are a 5.25 per cent.
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