UK: cuts possible

Article Abstract:

NatWest Markets sees a possible reduction in UK interest rates prior to an election. Rates are often reduced before elections and a drop in the UK inflation rate may be used to justify a drop in interest rates on the grounds that rates are high in real terms. Future levels of inflation should be the criteria for setting interest rates, and the Bank of England opposes a drop in interest rates, but there are political reasons for lowering rates prior to an election.

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Base rates: come on down

Article Abstract:

UK interest rates are likely to be reduced, but there is no clear-cut economic reason for doing so. Economic growth is slowing but the UK chancellor foresees a reversal of this process. A cut in German interest rates would put downward pressure on UK interest rates in pound sterling were to rise. There are strong political reasons for reducing interest rates since reductions in taxation are not enough to win support for the ruling Conservative Party.

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