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Brokers look for rate reductions

There is growing speculation that interest rates will fall despite the monetary policy committee’s decision last week to keep bank base rate at 4.5 per cent for the fifth consecutive month.

Some commentators believe there is an compelling argument that rates should be lowered.

Rates were last reduced in August 2005 by 25 basis points from 4.75 per cent.

John Charcol technical director Ray Boulger says he firmly believes there will be a change in the near future.

He says: “January rarely sees a base rate change as more time is needed to assess the economic impact of Christmas. However, the surprise vote by MPC member Steve Nicol for a quarter-point reduction at the December meeting has strengthened the likelihood of a rate cut in the very near future. I expect to see at least two quarter-point reductions this year.”

Lloyds TSB Financial Markets chief economist Trevor Williams says he is disappoin- ted that rates were not cut.

He says: “This month, many will be left wondering why, once again, the MPC has decide to keep the lid on rates when, for some, the arguments for a decrease seem overwhelming.”

However, the Royal Institute of Chartered Surveyors is urging the Government not to cut rates.

It says: “We see little reason for the Bank of England to rush into cutting interest rates further in the next few months unless there is a ren-ewed deterioration in high-street spending.”

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