UK inflation for September as measured by the governments preferred measure the Consumer Price Index remained steady at 1.8%. The more widely recognised measure of inflation RPI, fell to 3.9%.

The RPI index is applied to increases state benefits such as pensions and child benefit, however a lesser known ROSSI Index (excluding housing costs) is applied to job seekers allowance and housing benefit which came in at a much lower 2.3%.

Many economists have taken the latest figures as further evidence that a cut in UK interest rates is just around the corner,possibly at the November MPC meeting. However the Market Oracle forecast as of 22nd August 07 is for the first cut in UK interest rates to occur in January 2007, with a downtrend targeting 5% by September 2007. This expectation is in anticipation of sharply lower growth during 2008 due to a housing market bust. The Market Oracle forecast is for growth of 1.4% for 2008, as against the governments expectations of 2.5%.

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 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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