The Bank of England is expected to keep UK interest rates on hold at 5.75% at Thursday's MPC Meeting despite widespread calls for a cut in interest rates in the face of the latest rate cut in the US to 4.5%, down from 5.25% in September 07.

The ongoing credit crunch continues to claim more victims, which this week claimed the scalp of the worlds biggest bank, Citicorp. The tightening in credit will further squeeze the UK economy and therefore increases the scope for interest rate cuts in the future.

The Bank of England has adopted a wait and see approach before taking the first step in a series of anticipated rate cuts, as the bank evaluates the balance between slowing economic growth and potential risks of inflation on the back of surging commodity prices which are to a large part reacting to the slumping dollar and continuing strong demand from emerging markets.

The Market Oracle forecast as of 22nd August 2007 is for UK interest rates to fall to 5% by September 2008, with the probable date for the first cut being January 2008. The weakening housing market continues to build added pressures for a rate cut. The Market Oracle forecast for UK house prices is for a fall of 15% over the next 2 years (as of 22nd August 2007) .

A string of articles over the past 2 months at the Market Oracle have highlighted the opportunities available to savers to benefit from high fixed interest rates that have now started to be reduced. Therefore savers need to act sooner rather than later as the trend in savings rates is now for lower savings interest rates.

UK Interest Rate Forecast for 2008 - As of 22nd August 2007

UK Interest Rates to Fall to 5% by September 2008, First Cut in UK Interest Rates to Occur in January 2008 (22nd Aug 07), (18th Sept 07)

UK Interest Rate Forecast for 2007 - As of 26th December 2006

UK Interest Rates to Peak at 5.75% between Aug and Oct 07(26th Dec 06), (7th Nov 06)

By Nadeem Walayat
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Nadeem Walayat has over 20 years experience of analysing and trading the financial markets and is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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