Banks expected to 'wait for slowdown'

12 November 2007
Economic slowdown will prompt a cut in UK and European interest rates in the first quarter of next year, according to a financial expert.

Paul Niven, head of asset allocation for F&C, suggested that pressure was building from the banking sector to cut interest rates and bolster consumer confidence, but only an economic slowdown in Britain and on mainland Europe would allow this.

Both the Bank of England and the European Central Bank have maintained interest rates at 5.75 per cent and four per cent respectively.

Mr Niven added: "The US Federal Reserve is the one leading the way in cutting interest rates but … it is now only a matter of time before the other major central banks follow."

Some financial commentators have said that the monetary policy committee's (MPC's) decision to leave UK interest rates at 5.75 per cent for the fourth consecutive month is unsurprising.

Chief economist at Scottish Widows Investment Partnership Richard Dingwall-Smith said that the economy was at a turning point but suggested the MPC might be concerned over rising energy prices.

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