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Loan rates to get cheaper

27 June 2005

The centre for economics and business research (cebr) is predicting UK interest rates to go down.

The UK is likely to see a downward shift in the last quarter of this year as rates slip from 4.75 to 4.5 per cent.

The cebr further predicts UK interest rates should dip even lower to 4.25 per cent sometime in the new year.

Cebr's latest Quarterly Business Forecast expects Gordon Brown to miss his Budget forecast of three per cent to 3.5 per cent economic growth in 2005.

It feels it will be closer to 2.4 per cent assuming that there are only minor additional tweaks in the measurement of UK GDP by the Office for National Statistics.

On top of this the current consumer slowdown is set to continue.

Cebr predicts: "The best Britain is likely to get in the next few years is an expansion that is ahead of the euro area but behind that of the US."

However, it still feel the UK economy will do "significantly better than the euro area".

As for inflation, cebr believes it will subside from the Bank of England's target of two per cent to around 1.7 per cent next year.

Looking even further ahead, it says: "Once the economy weakens further, interest rates may move down to hit a low of four per cent in 2007.

"That, plus a world economic recovery, should be sufficient