A further reduction in British interest rates is expected to be announced by the Bank of England today one month after its monetary policy committee (MPC) surprised the markets by sanctioning a 0.5 per cent cut to 6.75 per cent.

City markets are divided on the likely size of today's anticipated reduction. Most economists believe the MPC will opt for caution, with a 0.25 of a percentage point cut in keeping with its policy of smaller rate changes prior to last month's reduction. However, fears of recession next year are prompting a minority to call for larger reductions of 0.5 or even one percentage point.

Evidence of a sharp slowdown in economic growth is accumulating. Business optimism is at its lowest level for 18 years and retailers are suffering from slower consumer spending. Inflationary pressures remain very subdued with price falls occurring in such sectors as clothing, footwear, carpets and furniture.