The interest rate debate remains finely balanced, with lingering upside risks to inflation likely to keep interest rates on hold in September. However, the Monetary Policy Committee (MPC) appears to be edging gradually towards a loosening bias and we continue to think that interest rates will fall before the end of the year. And if the economy contracts outright next year, as we now expect, interest rates are likely to fall to around 3.5% or even lower.
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