Economy slowdown to bring inflation back to target

Analysts are expecting a slowing economy to bring the UK's inflation rate back towards the government target of two per cent.

A poll carried out by Reuters suggests that economists expect growth will fall to two per cent during the course of 2008, before climbing to 2.3 per cent in 2009.

Commenting in the wake of the poll, Trevor Williams of Lloyds TSB told the news agency: "UK growth [will] recover in 2009 but the slowdown will be rapid in 2008. This will lead to rate cuts. The only question is whether the cuts are to 5.25 per cent or to five per cent."

Out of the 53 analysts surveyed, 46 felt the Bank of England's monetary policy committee (MPC) would reduce interest rates to 5.5 per cent or lower by the end of March 2008.

Wednesday saw the Bank of England publish minutes of its last MPC meeting, which was held between November 7th and 8th.

Some seven of the nine members voted to maintain the interest rate at 5.75 per cent and two - John Gieve and David Banchflower - voted to cut the base rate by 0.25 percentage points.

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