Fewer analysts predict a cut in interest rates in November

Following the last Monetary Policy Committee meeting in October, 14 out of 52 economists that were polled by Reuters expected interest rates to fall in November.

However, according to the latest poll the number of analysts that are predicting a fall in interest rates has now fallen, with just 5 out of 60 analysts polled expecting the Bank of England to cut interest rates by a quarter point. It is thought that healthy economic growth could have something to do with the change in the level of predictions in terms of whether interest rates will fall.

Out of the 60 analysts and economists that were polled by Reuters at the end of October 55 predicted that after the next Monetary Policy Committee meeting on November 8th interest rates will remain on hold at 5.75%. Rates have gone up five times between August 2006 and July 2007, each time by 0.25%, which took the rate from 4.5% to 5.75%. However, since July of this year interest rates have remained stable at 5.75%, which is thought to be partly due to the possible effects of the credit crunch.

The poll also showed that 47 out of 59 economists that were polled expected interest rates to fall by at least a quarter point by the first quarter of 2008. Many had predicted that this interest rate would come in November’s meeting. However, these predictions fell after it was revealed that the British economy grew at its fastest rate in three years in the third quarter of this year.

One industry professional stated: “We would expect them to continue to bide their time and allow more data to come in on the extent of any economic slowdown before changing rates. With the UK economy as a whole apparently still growing slightly above trend in Q3, there is certainly no immediate need for such a cut.”  

Tom Smith

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