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How long can the Bank of England avoid 0% interest rates?

As we approach the next MPC meeting it appears to be taken for granted within the city that rates will fall from 1.5% to 1% this week. Slowly but surely we are edging towards 0% interest rates in the UK and there is some debate as to how long the UK government and the Bank of England can avoid such a move. Liquidity is still dangerously low in the UK financial markets, businesses are still struggling and consumers have very few options with regards to taking on extra credit.

There is a suggestion that the Bank of England will hold off a move to 0% interest rates as long as possible in order to give recent rescue packages and fiscal stimulus moves time to kick in. However, the clock is ticking on the UK economy which is slipping into a deep recession which could if left untreated turn into a severe depression. The UK government is coming pressure from all sides to act sooner rather than later and while Gordon Brown looks to rally the troops overseas there is much work to be done back home.

The next two MPC meetings will be vital to the future direction of the UK economy in the short, medium and longer term.

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