POUNDED:

'Only rate cuts can save us' (Heather Stewart and Heather Connon, January 16, 2005, The Observer)

This will be 'the year the luck runs out' for homeowners, consumers and the Chancellor, leading economist Roger Bootle warns today, predicting that the Bank of England will have to slash interest rates to stave off a recession. [...]

With slowing government spending, falling house prices and rising unemployment, Bootle says the only cause for hope is that the Bank of England will have room to cut interest rates rapidly. 'I wouldn't say that a recession is likely, but I wouldn't dismiss it: you've got several key dangers, and they're interactive, so the Bank has a major role here. You've got to hope that they could fend it off.'

He predicts that borrowing costs will fall from 4.75 per cent currently to just 4 per cent by the end of 2005, with the first rate cut expected in May, but perhaps as soon as next month, when the Bank publishes its latest set of economic forecasts. 'I think the next month's data are crucial,' he says.

You can't sustain such high rates in a time of global deflation.

Posted by Orrin Judd at January 15, 2005 9:38 PM