Barclays stockbrokers predicts the MPC will cut rates

Speculating on Thursday’s MPC interest rate decision, Henk Potts, Equity Strategist at Barclays Stockbrokers said: “Pressure has been building and building on the Bank of England to reduce interest rates as the economic picture deteriorates and property prices fall. Recent evidence also suggests that the credit crunch is starting to contaminate the wider economy.

“While inflation is likely to remain high for most of 2008, it should begin to moderate into 2009 as slower growth reduces capacity pressures, while commodity price inflation wanes, thus giving the Bank the room for manoeuvre that it requires.

“We think that the Monetary Policy Committee will cut rates by 0.25% on Thursday and by a further 0.5% by August, taking rates back to 4.5%.”