Lower Interest Rates to Come?

In its quarterly Inflation Report, the Bank of England forecast that national income could shrink by one to two percentage points over the next few quarters and growth would probably be flat by the end of next year. Consumer price inflation, which at its last reading registered an annualised rate of 5.2 per cent, will fall to its target rate of 2 per cent by the middle of 2009.

In remarks at a press briefing Mervyn King, Bank of England governor, said interest rates could fall much lower than their current 3 per cent and declined to rule out cutting rates to zero.

“We are certainly prepared to cut Bank rates again if that proves necessary,” Mr King said.