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UK Base Rates Cut by 0.25% to 4.5% and more cuts likely over coming months

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Today the Bank of England cut UK base rates from 4.75% to 4.5% meaning we have seen the top of the cycle of rising rates and are now starting to see falls.

Stuart Law at Asstez predicts falls to a base rate of 4% by the end of 2006 but some commentators see it at 3.5% next year. Stuart Law said "It is very unlikely that rates need to fall much further as the economy is generally in good shape. It will have to bee seen whether the Bank of England over-reacts to the retail slow-down by dropping rates too much. I think we are going to see an increase in the savings rate after A Day and this diverted capital will be to the detriment of high street spend. Retail will suffer a little but at least people will be getting their pension savings sorted out finally."

"It also remains to be seen whether the ECB drops euro base rates from 2% to a lower rate - in the past people have said rates need to rise but it is patently clear that the Euro economy excepting Ireland and the UK is in a terrible mess and only a sustained period of lower rates is likely to solve tis in an orderl way - perhaps a property boom across the whole of Europe is what is needed to drive retail spend and personal wealth as it has in the UK, leading to a strong economy."

 

 

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