‘At last the cavalry have arrived to save the fort.’ That was the view of Edward Menashy, chief economist of stockbroker Charles Stanley, on the Bank of England’s Monetary Policy Committee’s (MPC) decision to cut the base rate by 25 basis points, to 5.5 per cent.

He added, ‘Although the MPC might have preferred to wait before reducing the base rate, the deterioration in the UK economy has become serious.’

Peter Bickley, director of economics at Tilney, observes that ‘Until as late as Wednesday morning this rate decision was really too close to call, with probably a slight bias against a cut. But soft data over the past 24 hours will have influenced the committee in this decision.’

He adds, ‘Future rate changes may not be as swiftly forthcoming as some now expect; look for the MPC to be watching the data over the year-end very carefully.’

Others are more confident that rates are now on a downward trend. New Star’s Simon Ward, one of a minority of economists to predict the MPC’s action in advance, feels that ‘Another quarter of a percentage point cut is likely in January or February and further reductions could follow, unless market conditions normalise early in the New Year.’

Henk Potts, equity analyst at Barclays Stockbrokers, agrees, ‘A combination of slowing growth, a cooling housing market, declining consumer confidence and soft retail sales led to today’s cut, and we think these factors will continue to keep pressure on the Bank of England to cut rates. We are currently predicting that rates will be reduced again in February and May, taking us back to five per cent.’

Richard Dingwall-Smith, chief economist at Scottish Widows Investment Partnership, reports, ‘We expect that this first cut in interest rates will be followed by two further quarter-point cuts taking the bank rate down to five per cent by the middle of 2008, with the possibility of one further cut to 4.75 per cent subsequently.’