An expected rate cut by the Bank of England - given fresh impetus by yesterday's quarterly inflation report - could be as high as 0.5% by late Spring, New Star's Simon Ward says.
Ward says the two-year-ahead inflation forecast assuming unchanged 5.75% rates is far below target at an estimated 1.75%, pointing out this is the largest negative deviation in the history of the Monetary Policy Committee. He adds the GDP forecast based on unchanged rates shows annual growth slowing sharply from 3.3% currently to below 2% by the third quarter of 2008. However, Ward questions why the Bank didn’t use this economic data as justification for a rate cut last week. “Risks to the forecast are judged to be balanced for inflation and on the downside for growth, versus on the upsi...
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