MPC may cut rates in December

The Bank of England's Monetary Policy Committee (MPC) may announce a cut to the base rate of interest in December.

That is according to Royal London Asset Management (RLAM), which says that current market conditions may force its hand.

MPC members are due to meet on Thursday to announce the base rate for November and it is widely expected that it will choose to maintain interest rates for the fourth consecutive month.

However, RLAM believes that a cut could be announced before the end of 2007.

"The latest PMI data suggest that after many months of strong growth, the UK economy is now slowing down," said Ian Kernohan, economist at RLAM.

"The MPC wants things to slow in order to contain inflationary pressures, so they will not rush to cut interest rates at this stage however, I do expect next week's Inflation Report to call the top in UK rates. 

"Further weakness in the data and continued turmoil in the financial markets should herald a rate cut in December," he added.

The prediction goes against other leading economists, most of whom anticipate a rate cut being announced in 2008.

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