BoE 'may follow US example' ? commercial mortgages

01 December 2008

The Bank of England (BoE) may be forced to follow the lead of the US Federal Reserve and lower interest rates even further, it has been suggested.

Ross Walker, an economist at Royal Bank of Scotland (RBS), claimed that if the US institution cuts rates to 0.5 per cent, the UK's Bank may be caught in the "slip stream".

Rates being slashed to this level could reduce the cost of taking out commercial mortgages.

Mr Walker revealed that RBS expects a cut of 50 basis points to be made in January and 25-basis point cut in February, meaning that Britain will have a base rate of 1.5 per cent by the next inflation report.

"It's clear we are going to see big reductions, but there is uncertainty over where we will get to and how," he remarked.

Recently, the Bank of England stated there is a "substantial risk" of inflation targets being missed if interest rates are maintained at current levels.