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Interest rates set to plunge to 0% as figures reveal economy is shrinking twice as fast

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UK Daily Mail
Wednesday, Dec 10, 2008

Interest rates may have to be cut to zero after it was revealed the economy is contracting at a much faster pace than experts predicted.

Britain’s gross domestic product fell by one per cent in the three months to November and will probably plunge by even more in the final quarter of the year, according to the respected National Institute for Economic and Social Research (NIESR).

The worse-than-expected contraction could force the Bank of England to reduce the cost of borrowing to zero per cent in the New Year as it battles to stop the recession turning into a slump.

The latest dire economic forecast came as the Pound hit a record low against the euro and the markets rated Britain a greater credit risk than the fast food chain Mcdonald’s.

One euro is now worth just 87.43p – sterling’s weakest value since it was introduced in 1999, fuelling fears it could eventually reach parity against the single currency and the US dollar.

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  • A d v e r t i s e m e n t

The pound has now sunk nearly 20 per cent against the euro in the past year as UK interest rates have been slashed from a peak of 5.75 per cent to two per cent.

Mark O’Sullivan, director of trading at Currencies Direct, said he expected to see a ‘series of record lows’ for the pound against the euro in the run-up to Christmas.

‘I don’t think we’ll see parity but you can never rule it out,’ he warned.

Full article here

This article was posted: Wednesday, December 10, 2008 at 4:58 am





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