UK interest rate could drop even further: Aegon UK

UK interest rate could drop even further: Aegon UK

The spectre of deflation could prompt the Bank of England to cut interest rates by 0.25 per cent or engage in more quantitative easing in 2015, Nick Dixon Aegon UK’s investment director has said.

Mr Dixon said: “The threat of deflation, together with sterling’s gains against the euro, have created an unexpected challenge for the BoE, and we could see a 0.25 per cent interest rate, and even a reinjection of quantitative easing, before the year is through.”

His comments came after the Bank of England warned in its 58-page Inflation Report: February 2015, warned that inflation could fall below zero in the first half of the year.

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It said: “Inflation is judged likely to remain close to zero for most of 2015, reflecting past falls in energy, food and other import prices and some continued drag from domestic slack.

“The near-term projection is considerably lower than it was three months ago and it is now more likely than not that CPI inflation will dip briefly below zero at some point in the first half of 2015.”