MPC could ’spring a surprise’
The monetary policy committee (MPC) may surprise the market and spring another rate cut when it comes to making a decision this week, one analyst has said.
Such a move, which would follow last month's rate cut which brought the cost of borrowing down to 5.25 per cent, would be welcomed by those looking to save money on their mortgage and would contradict much of the prevailing expectations.
However, Simon Ward, an economist with New Star, said that recent economic data suggested that it could be a close call, with its statistical model predicting a narrow vote for a quarter point rate cut by the MPC of five to four in favour.
"The last Inflation Report indicated that the MPC expected to cut interest rates but was inclined to be cautious because of near-term inflationary pressures," Mr Ward commented.
"Credit market conditions have, however, deteriorated further since its last meeting, suggesting greater downside risks to the economy and a possible inflation undershoot over the medium term."
Some analysts are predicting that the cost of borrowing could fall to four per cent by the end of the year, but a degree of volatility continues to pervade the economy, while the housing market is showing signs of cooling.
Mortgages for professionals is a whole-of-market broker providing expert mortgage advice to high earning professionals such as pharmacists, engineers and doctors
Such a move, which would follow last month's rate cut which brought the cost of borrowing down to 5.25 per cent, would be welcomed by those looking to save money on their mortgage and would contradict much of the prevailing expectations.
However, Simon Ward, an economist with New Star, said that recent economic data suggested that it could be a close call, with its statistical model predicting a narrow vote for a quarter point rate cut by the MPC of five to four in favour.
"The last Inflation Report indicated that the MPC expected to cut interest rates but was inclined to be cautious because of near-term inflationary pressures," Mr Ward commented.
"Credit market conditions have, however, deteriorated further since its last meeting, suggesting greater downside risks to the economy and a possible inflation undershoot over the medium term."
Some analysts are predicting that the cost of borrowing could fall to four per cent by the end of the year, but a degree of volatility continues to pervade the economy, while the housing market is showing signs of cooling.
Mortgages for professionals is a whole-of-market broker providing expert mortgage advice to high earning professionals such as pharmacists, engineers and doctors
