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will the bank of england cut rates to-day!

  1. The Bank of England will reveal later on Thursday whether it will cut interest rates for the first time in more than a year.
    The interest rate is causing irreparable damage to our manufacturing industry



    Roger Lyons, Amicus

    The Bank cut rates to a 39-year low of 4.0% in November 2001 in an attempt to boost manufacturing.

    But it has been reluctant to cut rates more sharply because of fears of further heating up the housing market.

    Analysts expect rates to be left on hold for the 15th month in succession when the Bank's Monetary Policy Committee (MPC) emerges from its two-day meeting at mid-day.

    The European Central Bank (ECB)will make its decision on interest rates for the eurozone shortly afterwards, with no change expected there either.

    The 12 nations of the ECB have had their interest rates set at 2.75% since December, when there was a half point cut to boost growth.

    Job warnings

    But unions have warned that manufacturing jobs will continue to be lost unless the banks take action.

    Interest rates are likely to remain on hold for the time being



    John Butler, HSBC


    Britain's second largest union, Amicus, has led calls for a cut in UK interest rates.

    It said manufacturing was now in recession and suffered its biggest annual decline for a decade last year.

    Joint general secretary Roger Lyons said: "The interest rate is causing irreparable damage to our manufacturing industry.

    "The MPC could trigger tens of thousands of redundancies just by doing nothing."

    Calling for a rate cut of 0.5%, he accused the MPC of having an "unjustified obsession with house prices in the South East and consumer spending".

    And the German economy, the biggest in the eurozone, is faring significantly worse than the UK.

    Weak demand

    But analysts say falling share markets, concerns about global growth and the situation in Iraq are likely to be offset by higher-than-expected underlying inflation, at 2.7%.

    Worries about the effect of higher oil prices and a lower exchange rate are also expected to mitigate against a rate cut.

    Leaders at the Confederation of British Industry (CBI) has said it will not be calling for a rate cut because the main problem for industry was weak international demand.

    The organisation's latest regional trends survey, published on Wednesday, showed gloom about the prospects for manufacturers had spread to every part of the UK.

    John Butler, economist at HSBC said: "Short-term indicators point to softer activity in January as business expectations drop to their lowest level since December 2001.

    "Nevertheless, interest rates are likely to remain on hold for the time being."

    Future hopes

    Several investment banking firms are urging an immediate ECB rate cut to prevent the eurozone from slipping into recession.

    "With eurozone growth prospects looking so poor, inflation risks in retreat, the euro so strong and eurozone governments set to tighten fiscal policy, the ECB is the only swing producer able to muster a recovery in 2003," said Bear Stearns in its weekly commentary.

    One German analyst said expectations of an ECB rate cut would ease if a war in Iraq was "resolved quickly and successfully".

    "We expect rates to remain on hold until November.

    "In November we expect a 25 basis point rate hike," he added.


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