Chances of further interest rates ‘Slim’

The bank of England has hinted that further interest rate cuts are ’slim’. The Bank of England says the room for further rate cuts is limited as it predicts slower growth and rising inflation.

That could mean fewer interest rate cuts than financial markets expect.

Governor Mervyn King said that “it is the outlook for inflation, in the medium term” that the central bank’s Monetary Policy Committee (MPC) will remain focused on.

Mr King said it was likely that the rate of inflation would hit 3% by the middle of this year, which would require him to write a letter of explanation to the government.

The comments come amid increasing signs that problems in global financial markets, a strong pound, and earlier increases in the interest rates are creating problems for the UK economy.

The Bank cut UK interest rates last week to 5.25% from 5.5% in an attempt to prevent a major slowdown in the economy.

what interest rate cut?

The Bank of England announced on Thursday that it would cut interest rates by 0.25% to 5.25% after signs of a slowering economy. However, whilst banks benefited from the cuts immediately, some lenders are delaying passing the savings on to their customers.

The Uk’s biggest lenders which include Halifax, Abbey, Nationwide and Woolwich announced within minutes that the savings would be passed on to customers.

HSBC, however, will not pass on the cut to it’s borrowers on it’s standard variable rate until the 7th March.

Some borrowers will have to wait as long as three months for repayments to fall. BM Solutions, part of Halifax, has told customers they may have to wait until May. They will end up more than £100 worse off than those whose lender passed on the rate cut immediately. Northern Rock customers have to wait until the second month after a change.