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King sparks hope of April rate cut

The Bank of England could be poised to cut interest rates as early as next month, economists have predicted. It had been widely thought that the Bank would wait until May to trim the key base rate of interest with a view to curbing inflation. However, an admission from Mervyn King, the governor of the Bank of England, in an address to the Commons Select Committee that financial conditions have made a cut likely soon has prompted speculation that a reduction is now due in May. Howard Archer, chief UK and European economist at Global Insight, said: "We now expect the Bank of England to trim interest rates by a further 25 basis points, to five per cent in April rather than May. "Further out, we expect interest rates to fall to 4.5 per cent by the end of the year and to four per cent in the first half of 2009, as we believe that extended below-trend growth will eventually significantly undermine companies' pricing power and limit wage growth, thereby diluting underlying inflation pressures."

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