Further rate cuts unlikely as Bank looks to rein in inflation

May 14 2008 by Tony McDonough, icNorthWest

Further rate cuts for struggling home owners and borrowers look unlikely this year as policymakers battle to control runaway inflation, the Bank of England is signalling today.

The Bank’s latest quarterly inflation report suggests the Consumer Prices Index (CPI) will remain well above its 2% target in two years’ time if interest rates fall up to twice more this year to 4.5% as markets expect.

Even one more cut this year is by no means certain as the Bank’s forecast shows CPI undershooting the 2% target by the narrowest of margins in two years’ time if borrowing costs remain unchanged at 5%.