Press Release Summary: The Bank of England is likely to reduce interest rate in February after official consumer inflation figures revealed that inflation was under control.
Press Release Body: London (Loans Bazaar) 16 January, 2008: The interest rates are likely to fall next month as the Bank of England seems to have got some leeway amid the signs that inflation is under control.
The Consumer Price Index stood at 2.1% in December, a figure that has remained unchanged from October. The Government has a target of bringing down the inflation at 2%. The retail price index, a wider measure of the cost of living, reduced slightly from 4.3% to 4% as the mortgage costs increased less steeply.
The Bank of England was in a difficult position as to whether it should cut interest rates or not. However, with official figures on inflation out in open to a satisfactory level, this has given the Bank of England \'wiggle room\' to deliver its second reduction in borrowing costs within three months.
Howard Archer, the chief economist at Global Insight, said: "The stabilisation in consumer price inflation in December keeps a February interest rate cut by the Bank of England very much on the cards, and we expect rates to be trimmed from 5.5% to 5.25% then."
Following the credit squeeze in the financial markets, secured loans, mortgages and other borrowing options became costlier in the last four to five months. The property market is also indicating a slowdown as many potential buyers have been driven out of the market due to unaffordable cost of borrowing.
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