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King hints at rate cut

A cut in interest rates could be on the cards due to current financial turbulence, Mervyn King suggested yesterday.

Responding to the bank of England governor's comments, Global Insight analyst Howard Archer told the Guardian that a 25 basis point cut in rates was now expected for next month.

Equally, Mr Archer believes that interest rates will fall to 4.5 per cent by the end of the year, and will continue to drop to four per cent by the first quarter of 2009.

Tighter lending conditions have prompted the Bank to suggest a rate cut, as Mr King pointed to a new "new and difficult" phase in the global financial crisis.

"Across the world, confidence in financial markets is fragile," he added.

However, Mr King has also warned that there would be no 'blank cheque' from the UK taxpayer to ease the financial crisis.

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