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Bank Of England indicates base rates will fall next week

The Bank of England is expected to reduce UK base rates by anything up to 50 basis points, i.e. a reduction of half of one percent. However, the money markets are currently pricing in an 80 basis point fall (i.e. 0.8%) with concern that rates will fall further over the coming months. Yet again we seem to be in a situation whereby the money markets are running the UK economic strategy as investors continue to avoid sterling. The problem now is, does the Bank of England indicate further reductions in due course or make no comment after this latest expected reduction?

If the bank comment that rates may fall further this would put more pressure on sterling but if the bank say nothing then speculation will run rife in the money markets causing more upset and concern. There are still a vast number of economic experts who expect UK base rates to fall to near 0% in line with the US strategy implemented some weeks ago.

Whatever happens this week it would appear this is not the end of the situation and more movement is expected in due course. A reduction to 0% would effectively mean the government printing money to try and refloat the economy in one last desperate effort to breathe life into the UK business sector.

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