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Base Rate cuts threatened by value of the pound

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14/02/2008

The falling value of the British pound may influence the Bank of England’s decision to implement further cuts to the Base Rate, according to Legal & General.

The insurer revealed that the value of the pound has fallen by 10% over the past year, with the main decline being a drop of 15% against the Euro. James Carrick, spokesperson for L&G Investment Management, said the pound’s decreasing value will provide a stimulus to the economy by making UK exports more price competitive.

He added: “The falling value of our currency will also mean that imports will be more expensive, putting upward pressure on inflation. The Bank of England might find it difficult to strike a balance between moderate growth and stable inflation.

“With this backdrop, the prospects for significant rate cuts in the UK are quite limited in my view.” 

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