|
|
|
|
|
U.K. Rate Cut Grows More Likely EMMA CHARLTON, ILONA BILLINGTON and
NATASHA BRERETON LONDON -- The recent turmoil in global credit markets and the strong pound are taking their toll on British economic growth, increasing the likelihood of a cut in the country's interest rates. Data released yesterday showed factory output fell in September and service-sector activity slowed sharply last month. While the Bank of England has said some slowing is necessary if inflation is to remain at its 2% target, the data may indicate the deterioration is occurring faster than the bank had expected. Many economists now believe a rate cut is no more than months away, and the increased likelihood that U.K. interest rates will fall led to a drop in sterling against both the dollar and the euro.
Yesterday's figures "sent clearly negative signals in terms of the growth perspective," said Chiara Corsa, an economist at UniCredit Markets & Investment Banking. "There is no doubt that the current dislocation in financial markets is finally starting to take its toll on confidence, and this is a factor which in our view might convince the [Bank of England] that an early rate cut is warranted...to prevent a more pronounced slowdown than envisaged in the August forecasts." According to the Chartered Institute of Purchasing and Supply, the Purchasing Managers Index for the service sector plunged to 53.1 from 56.7 in September, its lowest level since May 2003.
|
||||
