Bank of England urged to cut interest rates this week

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by Kay Murchie

According to a statement made by the Ernst & Young Item Club, a respected economic forecasting body, the Bank of England should cut interest rates when it meets on Thursday to aid economic growth and avoid potential pitfalls of prolonged high rates.

The Bank of England’s Monetary Policy Committee is to meet this week and decide the interest rate policy for the coming month. Ernst & Young said a reduction in interest rates would improve investor confidence at the Bank of England and drive investment in business and the economy overall.

Interest rates are currently 5.75% after 5 consecutive increases throughout the year. Some analysts believe that rates will hit 6% by the end of 2007, however, rapidly falling inflation figures have now put a stop to this assumption.

With the ongoing market turbulence expected to cost the UK economy as much as 1% from its economic growth figure for the next year, it is hoped that the Bank of England’s Monetary Policy Committee will take notice of the warnings and reduce interest rates on Thursday.