Hopes higher for interest rate cuts

Hopes of a cut in interest rates were raised today, following the publication of the Bank of England's Monetary Policy Committee minutes.

12:22 22 December 2004

Hopes of a cut in interest rates were raised today, following the publication of the Bank of England's Monetary Policy Committee minutes.

Earlier this month the Monetary Policy Committee decided to keep interest rates on hold at their three-year high of 4.75 per cent, and today the reasons behind that decision were released.

The minutes of the December meeting show that a cut in interest rates was discussed then.

While none of the nine-member committee felt the time was right "to make a persuasive case for a reduction [in interest rates]" then the fact cuts were considered is significant, according to Simon Rubinsohn, chief economist at wealth management firm Gerrard.

In the wake of the Bank's decision economists, banks and mortgage brokers said they expected interest rates to fall.

In the ten months leading up to this August the Bank of England tried to bring inflation under control by raising interest rates five times.

This saw mortgage repayments increase by as much as ten per cent, HBoS has said, but a brighter future could now be in store for mortgage lenders.

After four successive meetings of the Monetary Policy Committee where no rate change has occurred, many people now believe the period of rising interest rates is at an end.

This optimism was undermined last week when figures for inflation, the economic indicator that the Bank of England tries to control by raising and lowering the cost of borrowing in the UK, came in ahead of expectations.

But the details of the minutes of the Bank's December meeting have raised hopes again that the cost of borrowing in the UK could be set to fall for the first time in more than a year.