As widely expected, the Bank of England today cut interest rates by a quarter of a percent to 4.5%.
The question for economists now is much lower borrowing costs will fall. While the City was virtually unanimous about today's cut, there is less agreement on where monetary policy goes from here.
Tamara Henderson of Action Economics said that a cut would be a "fine-tuning of monetary policy and not the beginning of an easing cycle." She thinks the base rate could well be put back to 4.75% as soon as February.
Others think the Bank will have to cut again to offset the economic weakness caused by the housing market and consumer spending slowdowns.
Roger Bootle, economic adviser to Deloitte & Touche, who had anticipated today's move for some time, thinks that rates will be at 4% by Christmas and will fall all the way to 3.5% by the middle of next year.
Mr Bootle does not think there is much of an inflationary threat as long as consumer demand is soft and unemployment is rising.
As for fears that lower rates will reignite house prices, Mr Bootle says: "Reductions in rates will not cause house price inflation to re-accelerate, because excessively high interest rates were not the problem in the first place. The problem is that house prices are too high in relation to earnings. This means that investors face unfavourable prospects for immediate capital gains while first time buyers face difficulty in amassing the necessary deposit. Lower interest rates will make little difference to these two problems."
At the consultancy Global Insight, Howard Archer believes the Bank's monetary policy committee will hold fire as it monitors the strength of the economy and inflationary developments. But he too believes that there are more cuts in store.
"We expect interest rates to be down to 4.25% by the end of this year," he said, "and to fall to 4% in the first half of 2006, as further below-trend growth and a modestly softer labour market reduces inflationary pressures and concerns."
So it could more good news for homeowners, but more grief savers in the next 12 months.
