Inflation Rate Expected At 5 Percent

Aug. 12, 2008 - PRLog -- On Thursday, the Bank of England held interest rates at 5.0 percent for the fourth straight month. The borrowing costs are expected to remain on hold as policymakers are balancing slowing growth and rising inflation.

The 76 analysts polled by a major financial daily had predicted that there will be no-change in the decision. The most expected rates for the rest of the year will be followed by cuts next year to revive the economy once inflation starts coming down to 2 percent.

Stuart Porteous, head of RBS Group Economics said that "The (Monetary Policy) Committee will likely stand pat for the remainder of the year as the tug of war between slower growth and mounting price pressures continues.” It has been expected that rates will be lowered next year when the inflation comes off its peak and the economy struggles to find its feet.

As a matter of fact, fears are growing and it is expected that the economy could soon enter recession for the first time after the early 1990s. Moreover, house prices are sliding even faster than before. The property downturn is gaining users confidence on the wider economy, as home-builders are cutting thousands of jobs and household goods sales dive.

Economists are waiting for the Bank's new forecasts in upcoming week to see where the central bank thinks inflation will be in two years' time. It is expected that in coming future, the central bank's target and could soon hit 5 percent. As a matter of fact, utility companies have raised their tariffs by up to 30 percent.

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