BoE faces "difficult" decision

The Bank of England (BoE) may have to make a "difficult" decision when it comes to deciding whether the base rate should be cut next year, one expert has suggested.

Lai Wha Co, principal economist for the Confederation of British Industry, said that inflation is expected to "creep up" during 2008.

This "inflationary pressure" comes at a time when the economy is beginning to slow down, potentially causing problems for the Bank, she commented.

She claimed that "on the one hand it''s monitoring how sharply the economy might slow, but on the other hand it has to weigh up the concerns about inflationary risk".

If inflation rises at a higher rate than many expect, the BoE may not be able to implement the interest rate cuts expected next year, the expert added.

Ray Boulger, senior technical manager at John Charcol, predicted this week that the base rate would be cut to five per cent in 2008.

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