While economic growth is slowing and inflation will continue to rise in the coming months, in 2009 the slower economic growth should lead to reduced inflation. There is therefore the chance of an interest rate cut later this year.
Barclays Stockbrokers, 05 June 2008
Commenting on today’s MPC interest rate decision, Henk Potts, Equity Strategist at Barclays Stockbrokers, said: "The MPC finds itself in the middle of a difficult balancing act, involving rising inflation on one side and slowing economic growth on the other.
“There is no doubt that UK economic growth is moderating - the credit crunch has reduced the availability of credit, the housing market is slowing down and the high street is showing signs of softening. Real incomes are also being squeezed by high inflation, which has the potential to further reduce household demand. Meanwhile, inflation is way above target and set to go even higher in the coming months.
“However, as you look into 2009, slowing economic growth should reduce capacity pressures and thus inflation, and therefore there is still the possibility the MPC could cut interest rates later on in the year.”
For further information contact:
Caroline Wells / Nicola Hankey
PR, Barclays Wealth
020 7114 7435 / 020 7114 9813
OR
Chantal Heckford / Katie Hayward / Katherine Hobby
Lansons Communications
020 7294 3630 / 020 7294 3631 / 020 7566 9704
chantalh@lansons.com / katieh@lansons.com / katherineh@lansons.com
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