UK signals further cuts

Bloomberg

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Inflation will fall "well below" the 2 percent target from the middle of 2009 and gross domestic product will contract by an annual 1.8 percent in the first three months of the year, forecasts by the Bank of England released yesterday showed. The predictions are based on market expectations of the interest rate just above the current 3 percent in the next quarter.

The Bank of England cut its benchmark interest rate by 1.5 percentage points on Nov. 6 to the lowest since 1955, and yesterday’s forecasts suggest that won't be enough to bring inflation back to the target. "The exceptional degree of... uncertainty... complicates any attempt to calibrate the scale and likelihood of these risks or the balance between them," the central bank said.